Form: 10-Q

Quarterly report pursuant to Section 13 or 15(d)

May 30, 2007

Table of Contents

 
 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
     
þ   Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended April 30, 2007
OR
     
o   Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from                      to                     .
Commission File Number 0-21180
INTUIT INC.
(Exact name of registrant as specified in its charter)
     
Delaware
(State of incorporation)
  77-0034661
(IRS employer identification no.)
2700 Coast Avenue, Mountain View, CA 94043
(Address of principal executive offices)
(650) 944-6000
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.
Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer þ      Accelerated filer o      Non-accelerated filer o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o No þ
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. 336,743,715 shares of Common Stock, $0.01 par value, were outstanding at May 23, 2007.
 
 

 


 

INTUIT INC.
FORM 10-Q
INDEX
             
        Page  
        Number  
PART I          
   
 
       
ITEM 1:          
   
 
       
        3  
   
 
       
        4  
   
 
       
        5  
   
 
       
        6  
   
 
       
        7  
   
 
       
ITEM 2:       27  
   
 
       
ITEM 3:       41  
   
 
       
ITEM 4:       43  
   
 
       
PART II          
   
 
       
ITEM 1:       44  
   
 
       
ITEM 1A:       45  
   
 
       
ITEM 2:       52  
   
 
       
ITEM 6:       53  
   
 
       
        54  
 EXHIBIT 31.01
 EXHIBIT 31.02
 EXHIBIT 32.01
 EXHIBIT 32.02
Intuit, the Intuit logo, QuickBooks, TurboTax, Lacerte, ProSeries, Digital Insight and Quicken, among others, are registered trademarks and/or registered service marks of Intuit Inc., or one of its subsidiaries, in the United States and other countries. QuickBooks: Simple Start Edition, Innovative Merchant Solutions, QuickTax, TaxWiz and ProFile, among others, are trademarks and/or service marks of Intuit Inc., or one of its subsidiaries, in the United States and other countries. Other parties’ marks are the property of their respective owners.

2


Table of Contents

PART I
ITEM 1
FINANCIAL STATEMENTS
INTUIT INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                 
    Three Months Ended     Nine Months Ended  
    April 30,     April 30,     April 30,     April 30,  
(In thousands, except per share amounts; unaudited)   2007     2006     2007     2006  
 
                               
Net revenue:
                               
Product
  $ 489,620     $ 420,201     $ 1,251,579     $ 1,159,734  
Service and other
    664,777       532,402       1,028,196       839,644  
 
                       
Total net revenue
    1,154,397       952,603       2,279,775       1,999,378  
 
                       
Costs and expenses:
                               
Cost of revenue:
                               
Cost of product revenue
    43,729       43,667       149,325       147,837  
Cost of service and other revenue
    95,095       64,264       233,760       186,905  
Amortization of purchased intangible assets
    13,817       2,289       18,708       8,001  
Selling and marketing
    216,514       187,654       593,052       531,987  
Research and development
    119,132       97,335       354,820       294,699  
General and administrative
    77,685       74,009       223,679       202,901  
Acquisition-related charges
    9,660       3,278       14,836       10,590  
 
                       
Total costs and expenses
    575,632       472,496       1,588,180       1,382,920  
 
                       
Operating income from continuing operations
    578,765       480,107       691,595       616,458  
Interest expense
    (12,823 )     —       (12,823 )     —  
Interest and other income
    10,967       9,070       32,303       20,940  
Gains on marketable equity securities and other investments, net
    347       79       1,568       7,373  
 
                       
Income from continuing operations before income taxes
    577,256       489,256       712,643       644,771  
Income tax provision
    208,634       190,229       257,039       247,864  
Minority interest, net of tax
    271       379       821       623  
 
                       
Net income from continuing operations
    368,351       298,648       454,783       396,284  
Net income (loss) from discontinued operations
    (1,140 )     —       (1,140 )     39,533  
 
                       
Net income
  $ 367,211     $ 298,648     $ 453,643     $ 435,817  
 
                       
 
                               
Basic net income per share from continuing operations
  $ 1.08     $ 0.87     $ 1.32     $ 1.14  
Basic net income (loss) per share from discontinued operations
    —       —       —       0.11  
 
                       
Basic net income per share
  $ 1.08     $ 0.87     $ 1.32     $ 1.25  
 
                       
Shares used in basic per share calculation
    339,495       343,670       344,351       349,656  
 
                       
 
                               
Diluted net income per share from continuing operations
  $ 1.04     $ 0.84     $ 1.27     $ 1.09  
Diluted net income (loss) per share from discontinued operations
    —       —       —       0.11  
 
                       
Diluted net income per share
  $ 1.04     $ 0.84     $ 1.27     $ 1.20  
 
                       
Shares used in diluted per share calculation
    351,686       355,918       357,767       362,226  
 
                       
See accompanying notes.

3


Table of Contents

INTUIT INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
                 
    April 30,     July 31,  
(In thousands; unaudited)   2007     2006  
ASSETS
               
Current assets:
               
Cash and cash equivalents
  $ 264,573     $ 179,601  
Investments
    1,100,529       1,017,599  
Accounts receivable, net
    190,776       97,797  
Income taxes receivable
    471       64,178  
Deferred income taxes
    58,877       47,199  
Prepaid expenses and other current assets
    58,895       53,357  
 
           
Current assets before funds held for payroll customers
    1,674,121       1,459,731  
Funds held for payroll customers
    259,086       357,299  
 
           
Total current assets
    1,933,207       1,817,030  
 
               
Property and equipment, net
    254,128       194,434  
Goodwill
    1,569,009       504,991  
Purchased intangible assets, net
    326,496       59,521  
Long-term deferred income taxes
    63,614       144,697  
Loans to officers
    8,865       8,865  
Other assets
    58,037       40,489  
 
           
Total assets
  $ 4,213,356     $ 2,770,027  
 
           
 
               
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
Current liabilities:
               
Accounts payable
  $ 129,343     $ 70,808  
Accrued compensation and related liabilities
    153,231       171,903  
Deferred revenue
    244,356       293,113  
Income taxes payable
    191,559       33,560  
Other current liabilities
    252,034       89,291  
 
           
Current liabilities before payroll customer fund deposits
    970,523       658,675  
Payroll customer fund deposits
    259,086       357,299  
 
           
Total current liabilities
    1,229,609       1,015,974  
 
               
Long-term debt
    997,777       —  
Other long-term obligations
    41,681       15,399  
 
           
Total liabilities
    2,269,067       1,031,373  
 
           
 
               
Commitments and contingencies
               
Minority interest
    967       568  
 
Stockholders’ equity:
               
Preferred stock
    —       —  
Common stock and additional paid-in capital
    2,207,665       2,092,914  
Treasury stock, at cost
    (2,287,815 )     (1,944,036 )
Accumulated other comprehensive income
    3,858       1,084  
Retained earnings
    2,019,614       1,588,124  
 
           
Total stockholders’ equity
    1,943,322       1,738,086  
 
           
Total liabilities and stockholders’ equity
  $ 4,213,356     $ 2,770,027  
 
           
See accompanying notes.

4


Table of Contents

INTUIT INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
                                                                 
                                            Accumulated                
                    Additional                     Other             Total  
    Common Stock     Paid In     Treasury     Deferred     Comprehensive     Retained     Stockholders’  
(Dollars in thousands; unaudited)   Shares     Amount     Capital     Stock     Compensation     Income (Loss)     Earnings     Equity  
                   
 
                                                               
Balance at July 31, 2006
    344,170,779     $ 3,442     $ 2,089,472     $ (1,944,036 )   $ —     $ 1,084     $ 1,588,124     $ 1,738,086  
Components of comprehensive income:
                                                               
Net income
    —       —       —       —       —       —       453,643       453,643  
Other comprehensive income, net of tax
    —       —       —       —       —       2,774       —       2,774  
 
                                                             
Comprehensive net income
    —       —       —       —       —       —       —       456,417  
Issuance of common stock upon
exercise of options — post-split
    7,081,403       71       10,202       145,184       —       —       (23,301 )     132,156  
Issuance of common stock pursuant to
vesting of restricted stock units — post-split
    1,927       —       —       42       —       —       (42 )     —  
Issuance of common stock pursuant to
Employee Stock Purchase Plan — post-split
    757,704       7       —       17,575       —       —       1,190       18,772  
Assumed vested stock options from
purchase acquisitions
    —       —       13,898       —       —       —       —       13,898  
Stock repurchases under stock
repurchase programs — post-split
    (17,083,600 )     (171 )     —       (506,422 )     —       —       —       (506,593 )
Repurchase of vested restricted
stock — post-split
    (5,362 )     —       —       (158 )     —       —       —       (158 )
Tax benefit from employee stock
option transactions
    —       —       32,109       —       —       —       —       32,109  
Share-based compensation
    —       —       58,756       —       —       —       —       58,756  
Other
    —       —       (121 )     —       —       —       —       (121 )
 
Balance at April 30, 2007
    334,922,851     $ 3,349     $ 2,204,316     $ (2,287,815 )   $ —     $ 3,858     $ 2,019,614     $ 1,943,322  
 
                                                                 
                                            Accumulated                
                    Additional                     Other             Total  
    Common Stock     Paid In     Treasury     Deferred     Comprehensive     Retained     Stockholders’  
(Dollars in thousands; unaudited)   Shares     Amount     Capital     Stock     Compensation     Income (Loss)     Earnings     Equity  
                   
 
                                                               
Balance at July 31, 2005
    179,270,062     $ 1,793     $ 1,976,161     $ (1,557,833 )   $ (16,283 )   $ 174     $ 1,291,487     $ 1,695,499  
Reclassification of deferred compensation
balance upon adoption of SFAS 123(R)
    —       —       (16,283 )     —       16,283       —       —       —  
Components of comprehensive income:
                                                               
Net income
    —       —       —       —       —       —       435,817       435,817  
Other comprehensive income, net of tax
    —       —       —       —       —       2,308       —       2,308  
 
                                                             
Comprehensive net income
                                                            438,125  
Issuance of common stock upon
exercise of options and other — pre-split
    6,249,588       62       —       285,931       —       —       (84,473 )     201,520  
Issuance of common stock pursuant to
Employee Stock Purchase Plan — pre-split
    399,419       4       —       18,277       —       —       (2,255 )     16,026  
Stock repurchases under stock
repurchase programs — pre-split
    (15,426,913 )     (154 )     —       (779,831 )     —       —       —       (779,985 )
Tax benefit from employee stock
option transactions
    —       —       46,109       —       —       —       —       46,109  
Share-based compensation (1)
    —       —       55,641       —       —       —       —       55,641  
 
Balance at April 30, 2006
    170,492,156     $ 1,705     $ 2,061,628     $ (2,033,456 )   $ —     $ 2,482     $ 1,640,576     $ 1,672,935  
 
 
(1)   Includes $55,364 for continuing operations and $277 for Intuit Information Technology Solutions discontinued operations.
Note: We effected a two-for-one stock split in the form of a 100% stock dividend on July 6, 2006.
See accompanying notes.

5


Table of Contents

INTUIT INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 
    Three Months Ended     Nine Months Ended  
    April 30,     April 30,     April 30,     April 30,  
(In thousands)   2007     2006     2007     2006  
Cash flows from operating activities:
                               
Net income
  $ 367,211     $ 298,648     $ 453,643     $ 435,817  
Net (income) loss from discontinued operations
    1,140       —       1,140       (39,533 )
 
                       
Net income from continuing operations
    368,351       298,648       454,783       396,284  
Adjustments to reconcile net income from continuing operations to net cash provided by operating activities:
                               
Depreciation
    25,230       23,117       68,566       68,878  
Acquisition-related charges
    9,660       3,278       14,836       10,590  
Amortization of purchased intangible assets
    13,817       2,289       18,708       8,001  
Amortization of purchased intangible assets to cost of service and other revenue
    1,449       2,526       6,754       6,816  
Share-based compensation
    20,585       17,191       58,756       55,364  
Amortization of premiums and discounts on available-for-sale debt securities
    939       720       2,900       2,786  
Net gains on marketable equity securities and other investments
    (347 )     (79 )     (1,568 )     (7,373 )
Deferred income taxes
    (2,376 )     (33,670 )     (11,775 )     (35,278 )
Tax benefit from share-based compensation plans
    2,679       17,033       32,109       46,109  
Excess tax benefit from share-based compensation plans
    (1,511 )     (9,564 )     (18,231 )     (22,949 )
Other
    19       218       762       919  
 
                       
Subtotal
    438,495       321,707       626,600       530,147  
 
                       
Changes in operating assets and liabilities:
                               
Accounts receivable
    155,895       174,665       (56,989 )     (58,186 )
Prepaid expenses, taxes and other current assets
    35,956       2,802       44,683       35,172  
Accounts payable
    (23,509 )     (33,146 )     25,461       26,456  
Accrued compensation and related liabilities
    (6,310 )     14,485       (40,036 )     (5,997 )
Deferred revenue
    (56,159 )     (36,607 )     (53,886 )     (59,669 )
Income taxes payable
    155,045       209,478       157,747       201,050  
Other liabilities
    8,821       5,643       111,085       62,645  
 
                       
Total changes in operating assets and liabilities
    269,739       337,320       188,065       201,471  
 
                       
Net cash provided by operating activities of continuing operations
    708,234       659,027       814,665       731,618  
Net cash provided by operating activities of discontinued operations
    —       —       —       14,090  
 
                       
Net cash provided by operating activities
    708,234       659,027       814,665       745,708  
 
                       
 
                               
Cash flows from investing activities:
                               
Purchases of available-for-sale debt securities
    (1,097,727 )     (589,772 )     (1,978,305 )     (1,271,564 )
Liquidation of available-for-sale debt securities
    454,408       227,940       1,440,155       1,054,222  
Maturity of available-for-sale debt securities
    391,148       42,756       452,762       95,196  
Proceeds from the sale of marketable equity securities
    —       5,765       858       10,000  
Net change in funds held for payroll customers’ money market funds and other cash equivalents
    152,688       15,218       98,213       (50,952 )
Purchases of property and equipment
    (36,402 )     (11,539 )     (89,308 )     (59,451 )
Proceeds from sale of property
    —       2,692       22       3,026  
Change in other assets
    (1,556 )     655       (8,260 )     (5,724 )
Net change in payroll customer fund deposits
    (152,688 )     (15,218 )     (98,213 )     50,952  
Acquisitions of businesses and intangible assets, net of cash acquired
    (1,207,283 )     (2,977 )     (1,269,276 )     (36,858 )
Deposit from acquirer of outsourced payroll assets
    44,312       —       44,312       —  
 
                       
Net cash used in investing activities of continuing operations
    (1,453,100 )     (324,480 )     (1,407,040 )     (211,153 )
Net cash provided by investing activities of discontinued operations
    —       —       20,989       171,833  
 
                       
Net cash used in investing activities
    (1,453,100 )     (324,480 )     (1,386,051 )     (39,320 )
 
                       
 
                               
Cash flows from financing activities:
                               
Proceeds from bridge credit facility
    1,000,000       —       1,000,000       —  
Retirement of bridge credit facility
    (1,000,000 )     —       (1,000,000 )     —  
Issuance of long-term debt, net of discounts
    997,755       —       997,755       —  
Net proceeds from issuance of common stock under stock plans
    26,731       69,995       150,928       217,546  
Purchase of treasury stock
    (301,378 )     (285,004 )     (506,751 )     (779,985 )
Excess tax benefit from share-based compensation plans
    1,511       9,564       18,231       22,949  
Debt issuance costs and other
    (6,307 )     (450 )     (7,622 )     (1,344 )
 
                       
Net cash provided by (used in) financing activities
    718,312       (205,895 )     652,541       (540,834 )
 
                       
 
                               
Effect of exchange rates on cash and cash equivalents
    4,799       1,611       3,817       3,573  
 
                       
Net increase (decrease) in cash and cash equivalents
    (21,755 )     130,263       84,972       169,127  
Cash and cash equivalents at beginning of period
    286,328       122,706       179,601       83,842  
 
                       
Cash and cash equivalents at end of period
  $ 264,573     $ 252,969     $ 264,573     $ 252,969  
 
                       
See accompanying notes.

6


Table of Contents

INTUIT INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Description of Business and Summary of Significant Accounting Policies
Description of Business
Intuit Inc. provides business, financial management and tax solutions for small businesses, consumers, and accounting professionals. Our flagship software products include QuickBooks, TurboTax, Lacerte, ProSeries and Quicken. On February 6, 2007 we acquired Digital Insight Corporation, a provider of outsourced online banking applications and services to banks, credit unions and savings and loan associations. Founded in 1983 and headquartered in Mountain View, California, we sell our products and services primarily in the United States. At April 30, 2007, we had approximately 8,300 employees in the United States and internationally in Canada, the United Kingdom and other locations.
Basis of Presentation
The condensed consolidated financial statements include the financial statements of Intuit and its wholly owned subsidiaries. We have included Digital Insight’s results of operations in our consolidated results of operations from the date of acquisition. See Note 5. Digital Insight’s accounting policies are consistent with those described in the summary of significant accounting policies in Note 1 to the financial statements in our Annual Report on Form 10-K for the fiscal year ended July 31, 2006. We have eliminated all significant intercompany balances and transactions in consolidation. The condensed consolidated financial statements also include the financial position, results of operations and cash flows of Superior Bankcard Services, LLC (SBS), an entity that acquires merchant accounts for our Innovative Merchant Solutions business. We are allocated 51% of the earnings and losses of this entity and 100% of the losses in excess of the minority interest capital balances. We therefore eliminate the portion of the SBS financial results that pertain to the minority interests on a separate line in our statements of operations and on our balance sheets.
We have reclassified certain amounts previously reported in our financial statements to conform to the current presentation, including amounts related to discontinued operations and reportable segments. We have also combined other revenue and cost of other revenue with service revenue and cost of service revenue because other revenue was less than 5% of total net revenue for the three and nine months ended April 30, 2007 and 2006.
Our Board of Directors authorized a two-for-one stock split which was effected in the form of a 100% stock dividend on July 6, 2006. All share and per share figures in the statements of operations and the notes to the financial statements retroactively reflect this stock split.
We have included all normal recurring adjustments and the adjustments for discontinued operations that we considered necessary to give a fair presentation of our operating results for the periods presented. These condensed consolidated financial statements and accompanying notes should be read together with the audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended July 31, 2006. Results for the three and nine months ended April 30, 2007 do not necessarily indicate the results we expect for the fiscal year ending July 31, 2007 or any other future period.
Seasonality
Our QuickBooks, Consumer Tax and Professional Tax businesses are highly seasonal. Some of our other offerings are also seasonal, but to a lesser extent. Revenue from many of our small business software products, including QuickBooks, tends to be at its peak around calendar year end, although the timing of new product releases or changes in our offerings can materially shift revenue between quarters. Sales of income tax preparation products and services are heavily concentrated in the period from November through April. These seasonal patterns mean that our total net revenue is usually highest during our second quarter ending January 31 and third quarter ending April 30. We typically report losses in our first quarter ending October 31 and fourth quarter ending July 31, when revenue from our tax businesses is minimal while operating expenses continue at relatively consistent levels.

7


Table of Contents

Computation of Net Income (Loss) Per Share
We compute basic net income or loss per share using the weighted average number of common shares outstanding during the period. We compute diluted net income per share using the weighted average number of common shares and dilutive potential common shares outstanding during the period. Dilutive potential common shares consist of the shares issuable upon the exercise of stock options and upon the vesting of restricted stock units (RSUs) under the treasury stock method. In loss periods, basic net loss per share and diluted net loss per share are identical since the effect of potential common shares is anti-dilutive and therefore excluded.
We include stock options with combined exercise prices and unrecognized compensation expense that are less than the average market price for our common stock, and RSUs with unrecognized compensation expense that is less than the average market price for our common stock, in the calculation of diluted net income per share. We exclude stock options with combined exercise prices and unrecognized compensation expense that are greater than the average market price for our common stock, and RSUs with unrecognized compensation expense that is greater than the average market price for our common stock, from the calculation of diluted net income per share because their effect is anti-dilutive. Under the treasury stock method, the amount that must be paid to exercise stock options, the amount of compensation expense for future service that we have not yet recognized for stock options and RSUs, and the amount of tax benefits that will be recorded in additional paid-in capital when the awards become deductible are assumed to be used to repurchase shares.

8


Table of Contents

The following table presents the composition of shares used in the computation of basic and diluted net loss per share for the periods indicated.
                                 
    Three Months Ended     Nine Months Ended  
    April 30,     April 30,     April 30,     April 30,  
(In thousands, except per share amounts)   2007     2006     2007     2006  
 
                               
Numerator:
                               
Net income from continuing operations
  $ 368,351     $ 298,648     $ 454,783     $ 396,284  
Net income (loss) from discontinued operations
    (1,140 )     —       (1,140 )     39,533  
 
                       
Net income
  $ 367,211     $ 298,648     $ 453,643     $ 435,817  
 
                       
 
                               
Denominator:
                               
Shares used in basic per share amounts:
                               
Weighted average common shares outstanding
    339,495       343,670       344,351       349,656  
 
                       
 
                               
Shares used in diluted per share amounts:
                               
Weighted average common shares outstanding
    339,495       343,670       344,351       349,656  
Dilutive common equivalent shares from stock options and restricted stock awards
    12,191       12,248       13,416       12,570  
 
                       
Dilutive weighted average common shares outstanding
    351,686       355,918       357,767       362,226  
 
                       
 
                               
Basic and diluted net income per share:
                               
Basic net income per share from continuing operations
  $ 1.08     $ 0.87     $ 1.32     $ 1.14  
Basic net income (loss) per share from discontinued operations
    —       —       —       0.11  
 
                       
Basic net income per share
  $ 1.08     $ 0.87     $ 1.32     $ 1.25  
 
                       
 
                               
Diluted net income per share from continuing operations
  $ 1.04     $ 0.84     $ 1.27     $ 1.09  
Diluted net income (loss) per share from discontinued operations
    —       —       —       0.11  
 
                       
Diluted net income per share
  $ 1.04     $ 0.84     $ 1.27     $ 1.20  
 
                       
 
                               
Weighted average stock options and restricted stock awards excluded from calculation due to anti-dilutive effect
    12,087       7,672       10,023       16,970  
 
                       
 
Share-Based Compensation Plans
Effective August 1, 2006, we began using a lattice binomial model to estimate the fair value of stock options granted. Prior to that date we used the Black Scholes valuation model. This change did not have a material impact on our financial position, results of operations or cash flows. Our stock options have various restrictions, including vesting provisions and restrictions on transfer, and are often exercised prior to their contractual maturity. We therefore believe that lattice binomial models are more capable of incorporating the features of our stock options than closed-form models such as the Black Scholes model. The use of a lattice binomial model requires the use of extensive actual employee exercise behavior data and a number of complex assumptions including the expected volatility of our stock price over the term of the options, risk-free interest rates and expected dividends.
Significant Customers
No customer accounted for 10% or more of total net revenue in the three and nine months ended April 30, 2007 or 2006. No customer accounted for 10% or more of total accounts receivable at April 30, 2007 or July 31, 2006.

9


Table of Contents

Amounts due from Rock Acquisition Corporation (Rock), the purchaser of our Quicken Loans mortgage business, under certain licensing and distribution agreements represented approximately 10% of accounts receivable at July 31, 2006. Amounts due from Rock at April 30, 2007 were not significant.
Recent Accounting Pronouncements
FIN 48, “Accounting for Uncertainty in Income Taxes”
In June 2006 the Financial Accounting Standards Board (FASB) issued Financial Interpretation No. (FIN) 48, “Accounting for Uncertainty in Income Taxes.” FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with Statement of Financial Accounting Standards (SFAS) No. 109, “Accounting for Income Taxes.” FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. It also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006, which means that it will be effective for our fiscal year beginning August 1, 2007. We are in the process of evaluating this guidance and therefore have not yet determined the impact that the adoption of FIN 48 will have on our financial position, results of operations or cash flows.
SFAS 157, “Fair Value Measurements”
In September 2006 the FASB issued SFAS 157, “Fair Value Measurements.” SFAS 157 provides enhanced guidance for using fair value to measure assets and liabilities. The standard also responds to investors’ requests for expanded information about the extent to which companies measure assets and liabilities at fair value, the information used to measure fair value and the effect of fair value measurements on earnings. SFAS 157 applies whenever other standards require or permit assets or liabilities to be measured at fair value. This standard does not expand the use of fair value in any new circumstances. SFAS 157 is effective for fiscal years beginning after November 15, 2007, which means that it will be effective for our fiscal year beginning August 1, 2008. We are in the process of evaluating this standard and therefore have not yet determined the impact that the adoption of SFAS 157 will have on our financial position, results of operations or cash flows.
SFAS 159, “The Fair Value Option for Financial Assets and Financial Liabilities”
In February 2007 the FASB issued SFAS 159, “The Fair Value Option for Financial Assets and Financial Liabilities.” SFAS 159 provides companies with an option to report selected financial assets and liabilities at fair value. The standard’s objective is to reduce both complexity in accounting for financial instruments and the volatility in earnings caused by measuring related assets and liabilities differently. The standard requires companies to provide additional information that will help investors and other users of financial statements to more easily understand the effect of the company’s choice to use fair value on its earnings. It also requires companies to display the fair value of those assets and liabilities for which the company has chosen to use fair value on the face of the balance sheet. The new standard does not eliminate disclosure requirements included in other accounting standards, including requirements for disclosures about fair value measurements included in SFAS 157, “Fair Value Measurements,” and SFAS 107, “Disclosures about Fair Value of Financial Instruments.” SFAS 159 is effective for fiscal years beginning after November 15, 2007, which means that it will be effective for our fiscal year beginning August 1, 2008. We are in the process of evaluating this standard and therefore have not yet determined the impact that the adoption of SFAS 159 will have on our financial position, results of operations or cash flows.
2. Cash and Cash Equivalents, Investments and Funds Held for Payroll Customers
We consider highly liquid investments with maturities of three months or less at the date of purchase to be cash equivalents. Cash equivalents consist primarily of money market funds in all periods presented. Investments consist of available-for-sale investment-grade debt securities that we carry at fair value. Funds held for payroll customers consist of cash, cash equivalents and available-for-sale investment-grade debt securities. Except for direct obligations of the United States government, securities issued by agencies of the United States government, and money market or cash management funds, we diversify our investments by limiting our holdings with any individual issuer.

10


Table of Contents

The following table summarizes our cash and cash equivalents, investments and funds held for payroll customers by balance sheet classification at the dates indicated.
                                 
    April 30, 2007     July 31, 2006  
(In thousands)   Cost     Fair Value     Cost     Fair Value  
Classification on balance sheets:
                               
Cash and cash equivalents
  $ 264,573     $ 264,573     $ 179,601     $ 179,601  
Investments
    1,100,787       1,100,529       1,018,364       1,017,599  
Funds held for payroll customers
    259,133       259,086       357,299       357,299  
 
                       
Total cash and cash equivalents, investments and funds held for payroll customers
  $ 1,624,493     $ 1,624,188     $ 1,555,264     $ 1,554,499  
 
                       
 
The following table summarizes our cash and cash equivalents, investments and funds held for payroll customers by investment category at the dates indicated.
                                 
    April 30, 2007     July 31, 2006  
(In thousands)   Cost     Fair Value     Cost     Fair Value  
Type of issue:
                               
Total cash and cash equivalents
  $ 430,252     $ 430,252     $ 442,880     $ 442,880  
Available-for-sale debt securities:
                               
Municipal bonds
    1,193,991       1,193,686       1,102,384       1,101,719  
U.S. government securities
    —       —       10,000       9,900  
Asset-backed securities
    250       250       —       —  
 
                       
Total available-for-sale debt securities
    1,194,241       1,193,936       1,112,384       1,111,619  
 
                       
Total cash and cash equivalents, investments and funds held for payroll customers
  $ 1,624,493     $ 1,624,188     $ 1,555,264     $ 1,554,499  
 
                       
 
We accumulate unrealized gains and losses on our available-for-sale debt securities, net of tax, in accumulated other comprehensive income (loss) in the stockholders’ equity section of our balance sheets. Gross unrealized gains and losses on our available-for-sale debt securities were as follows at the dates indicated:
                 
    April 30,     July 31,  
(In thousands)   2007     2006  
 
               
Gross unrealized gains
  $ 66     $ 20  
Gross unrealized losses
    (371 )     (785 )
 
           
Net unrealized losses
  $ (305 )   $ (765 )
 
           
 
The following table summarizes the fair value and gross unrealized losses related to 84 available-for-sale debt securities, aggregated by type of investment and length of time that individual securities have been in a continuous unrealized loss position, at April 30, 2007:
                                                 
    In a Loss Position for     In a Loss Position for        
    Less Than 12 Months     12 Months or More     Total in a Loss Position  
            Gross             Gross             Gross  
    Fair     Unrealized     Fair     Unrealized     Fair     Unrealized  
(In thousands)   Value     Losses     Value     Losses     Value     Losses  
 
                                               
Municipal bonds
  $ 266,623     $ (244 )   $ 32,818     $ (127 )   $ 299,441     $ (371 )
 
                                   
Total
  $ 266,623     $ (244 )   $ 32,818     $ (127 )   $ 299,441     $ (371 )
 
                                   

11


Table of Contents

We periodically review our investment portfolios to determine if any investment is other-than-temporarily impaired due to changes in credit risk or other potential valuation concerns. We believe that the investments we held at April 30, 2007 were not other-than-temporarily impaired. While certain available-for-sale debt securities have fair values that are below cost, we believe that if the securities were held to maturity it is probable that principal and interest would be collected in accordance with contractual terms. We believe that the unrealized losses at April 30, 2007 are due to changes in interest rates and not due to increased credit risk.
We include realized gains and losses on our available-for-sale debt securities in interest and other income in our statements of operations. Gross realized gains and losses on our available-for-sale debt securities were as follows for the periods indicated:
                                 
    Three Months Ended     Nine Months Ended  
    April 30,     April 30,     April 30,     April 30,  
(In thousands)   2007     2006     2007     2006  
 
                               
Gross realized gains
  $ 3     $ 2     $ 24     $ 12  
Gross realized losses
    (22 )     (17 )     (42 )     (505 )
 
                       
Net realized losses
  $ (19 )   $ (15 )   $ (18 )   $ (493 )
 
                       
 
The following table summarizes our available-for-sale debt securities held in investments and funds held for payroll customers, classified by the stated maturity date of the security.
                 
    April 30, 2007  
(In thousands)   Cost     Fair Value  
 
               
Due within one year
  $ 243,370     $ 243,226  
Due within two years
    61,726       61,663  
Due within three years
    6,714       6,704  
Due after three years
    882,431       882,343  
 
           
Total available-for-sale debt securities
  $ 1,194,241     $ 1,193,936  
 
           
 
Approximately 92% of our available-for-sale debt securities at April 30, 2007 had an interest reset date, put date or mandatory call date within one year.
3. Goodwill and Purchased Intangible Assets
Changes in the carrying value of goodwill by reportable segment during the nine months ended April 30, 2007 were as shown in the following table. Our reportable segments are described in Note 7. The fiscal 2007 increase in goodwill in our QuickBooks segment was due to the acquisition of StepUp Commerce, Inc. The fiscal 2007 increase in goodwill in our new Financial Institutions segment was due to the acquisition of Digital Insight. See Note 5.
                                 
    Balance             Foreign     Balance  
    July 31,     Goodwill     Currency     April 30,  
(In thousands)   2006     Acquired     Translation     2007  
 
                               
QuickBooks
  $ 4,228     $ 50,405     $ —     $ 54,633  
Payroll and Payments
    249,688       —       —       249,688  
Consumer Tax
    30,041       —       —       30,041  
Professional Tax
    90,507       —       —       90,507  
Financial Institutions
    —       1,013,313       —       1,013,313  
Other Businesses
    130,527       —       300       130,827  
 
                       
Totals
  $ 504,991     $ 1,063,718     $ 300     $ 1,569,009  
 
                       

12


Table of Contents

Purchased intangible assets consisted of the following at the dates indicated. The increases in intangible assets during the nine months ended April 30, 2007 were due primarily to the acquisition of Digital Insight. See Note 5.
                     
    Life in   April 30,     July 31,  
(Dollars in thousands)   Years   2007     2006  
 
                   
Customer lists
  3-7   $ 367,213     $ 213,001  
Less accumulated amortization
        (196,400 )     (175,438 )
 
               
 
        170,813       37,563  
 
               
 
                   
Purchased technology
  2-7     275,508       133,354  
Less accumulated amortization
        (131,067 )     (113,466 )
 
               
 
        144,441       19,888  
 
               
 
                   
Trade names and logos
  4-7     26,596       16,795  
Less accumulated amortization
        (15,973 )     (14,838 )
 
               
 
        10,623       1,957  
 
               
 
                   
Covenants not to compete
  3     12,198       11,786  
Less accumulated amortization
        (11,579 )     (11,673 )
 
               
 
        619       113  
 
               
 
                   
Total purchased intangible assets
        681,515       374,936  
Total accumulated amortization
        (355,019 )     (315,415 )
 
               
Total net purchased intangible assets
      $ 326,496     $ 59,521  
 
               
 
Expected future amortization of our purchased intangible assets at April 30, 2007 was as shown in the following table. Amortization of purchased technology is charged to cost of service and other revenue and amortization of purchased intangible assets in our statements of operations. Amortization of other purchased intangible assets such as customer lists is charged to acquisition-related charges in our statements of operations. The table does not include amortization for customer lists with a net book value of $7.3 million which became assets held for sale during the three months ended April 30, 2007. See Note 6, “Sale of Outsourced Payroll Assets.” These customer lists are no longer amortized but will be charged ratably against the gains that we expect to recognize as payroll customers transition to Automatic Data Processing, Inc. (ADP).
         
    Expected  
    Future  
    Amortization  
(In thousands)   Expense  
 
       
Three months ending July 31, 2007
  $ 30,593  
Twelve months ending July 31, 2008
    103,584  
Twelve months ending July 31, 2009
    82,364  
Twelve months ending July 31, 2010
    54,521  
Twelve months ending July 31, 2011
    30,903  
Twelve months ending July 31, 2012
    15,683  
Thereafter
    1,585  
 
     
Total expected future amortization expense
  $ 319,233  
 
     
 
Future acquisitions could cause these amounts to increase. In addition, if impairment events occur they could accelerate the timing of purchased intangible asset charges.

13


Table of Contents

4. Comprehensive Net Income (Loss)
SFAS 130, “Reporting Comprehensive Income,” establishes standards for reporting and displaying comprehensive net income (loss) and its components in stockholders’ equity. SFAS 130 requires that the components of other comprehensive income (loss), such as changes in the fair value of available-for-sale securities and foreign currency translation adjustments, be added to our net income (loss) to arrive at comprehensive net income (loss). Other comprehensive income (loss) items have no impact on our net income (loss) as presented in our statements of operations.
The components of accumulated other comprehensive income (loss), net of income taxes, were as follows for the periods indicated:
                                         
                    Realized              
    Unrealized Gain (Loss) on     Gain on     Foreign        
            Marketable     Derivative     Currency        
(In thousands)   Investments     Securities     Instruments     Translation     Total  
 
                                       
Balance at July 31, 2006
  $ (462 )   $ —     $ —     $ 1,546     $ 1,084  
Unrealized gains, net of income tax provisions of $175 and $294
    267       —       450       —       717  
Reclassification adjustment for realized loss (gain) included in net income, net of income tax provision of $7 and benefit of $3
    11       —       (5 )     —       6  
Translation adjustment, net of income tax
benefit of $1,341
    —       —       —       2,051       2,051  
 
                             
Other comprehensive income (loss)
    278       —       445       2,051       2,774  
 
                             
Balance at April 30, 2007
  $ (184 )   $ —     $ 445     $ 3,597     $ 3,858  
 
                             
 
                                       
Balance July 31, 2005
  $ (582 )   $ 1,451     $ —     $ (695 )   $ 174  
Unrealized (loss) gain, net of income tax benefit of $216 and provision of $1,354
    (353 )     2,210       —       —       1,857  
Reclassification adjustment for realized loss (gain) included in net income, net of income tax provision of $187 and benefit of $2,244
    306       (3,661 )     —       —       (3,355 )
Translation adjustment
    —       —       —       3,806       3,806  
 
                             
Other comprehensive income (loss)
    (47 )     (1,451 )     —       3,806       2,308  
 
                             
Balance April 30, 2006
  $ (629 )   $ —     $ —     $ 3,111     $ 2,482  
 
                             
 
Comprehensive net income (loss) was as follows for the periods indicated:
                                 
    Three Months Ended     Nine Months Ended  
    April 30,     April 30,     April 30,     April 30,  
(In thousands)   2007     2006     2007     2006  
 
                               
Net income
  $ 367,211     $ 298,648     $ 453,643     $ 435,817  
Other comprehensive income (loss)
    (9,932 )     1,170       2,774       2,308  
 
                       
Comprehensive net income, net of income taxes
  $ 357,279     $ 299,818     $ 456,417     $ 438,125  
 
                       
 
                               
Income tax provision (benefit) netted against
                               
other comprehensive income
  $ (10,462 )   $ 33     $ (868 )   $ (919 )
 
                       

14


Table of Contents

5. Acquisitions
StepUp Commerce, Inc.
On August 29, 2006 we acquired all of the outstanding shares of StepUp Commerce, Inc. (StepUp) for a total purchase price of approximately $60 million in cash. We deposited $7.5 million of the total purchase price in a third-party escrow account to be held through January 2008 to cover breaches of representations and warranties set forth in the purchase agreement, should they arise. StepUp provides services that allow small businesses to present their product information and images to online shoppers. We acquired StepUp as part of our Right for Me initiative to offer a wider range of business solutions for small businesses. StepUp became part of our QuickBooks segment. Tangible assets and liabilities acquired were not significant. We allocated $8.9 million of the purchase price to identified intangible assets and recorded the excess purchase price of $50.4 million as goodwill, none of which is deductible for income tax purposes. The identified intangible assets are being amortized over terms ranging from three to five years. We have included StepUp’s results of operations in our consolidated results of operations from the date of acquisition. StepUp’s results of operations for periods prior to the date of acquisition were not material when compared with our consolidated results.
Digital Insight Corporation
Purchase Price
On February 6, 2007 we acquired all of the outstanding shares of Digital Insight Corporation for a total purchase price of approximately $1.34 billion including the value of vested options assumed. Digital Insight is a provider of outsourced online banking applications and services to banks, credit unions and savings and loan associations. We intend to combine workflows in our financial management tools with online banking capabilities offered by Digital Insight to create new, easier to use, and better-value offerings for consumers and small businesses. We have included Digital Insight’s results of operations in our consolidated results of operations from the date of acquisition. We combined Digital Insight with our existing financial institutions group, which had been part of our Other Businesses segment, to create a new Financial Institutions segment during the three months ended April 30, 2007. See Note 7.
Pursuant to the terms of the acquisition agreement, we paid a cash amount of $39.00 per share for each outstanding share of Digital Insight common stock and assumed options to purchase Digital Insight common stock which were converted as of the acquisition date into options to purchase approximately 1.5 million shares of our common stock. The total purchase price of the acquisition was as follows:
         
(In thousands)   Amount  
 
       
Cash
  $ 1,319,105  
Fair value of assumed vested stock options
    13,898  
Acquisition-related transaction costs
    11,424  
 
     
Total purchase price
  $ 1,344,427  
 
     
 
The fair value of the assumed Digital Insight stock options was determined using a lattice binomial model. The use of the lattice binomial model and the method of determining the variables used in that model were consistent with our valuation of stock options in accordance with SFAS 123(R), “Share-Based Payment.” In addition to vested stock options valued at $13.9 million, we assumed unvested stock options valued at $7.9 million that will be amortized to share-based compensation expense over a weighted average vesting period of 2.4 years. The acquisition-related transaction costs included legal, accounting and investment banking fees.
Under the purchase method of accounting, we allocated the total purchase price to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values. We estimated the fair values with the assistance of a third party appraisal firm. The fair values assigned to identifiable intangible assets acquired were based on estimates and assumptions determined by management. We recorded the excess of purchase price over the aggregate fair values as goodwill, none of which is deductible for income tax purposes. The acquired goodwill was assigned to our Financial Institutions segment. See Note 3. We allocated the purchase price using the information currently available. We may adjust the preliminary purchase price allocation after obtaining more

15


Table of Contents

information regarding, among other things, asset valuations, liabilities assumed, and revisions of preliminary estimates. The purchase price allocation may not be finalized until fiscal 2008.
The total preliminary allocation of the Digital Insight purchase price is as follows:
         
(In thousands)   Amount  
 
       
Cash and cash equivalents
  $ 124,662  
Accounts receivable
    35,385  
Property and equipment, net
    21,549  
Goodwill
    1,013,313  
Intangible assets
    291,500  
Other current and noncurrent assets
    7,267  
Deferred income taxes
    (80,031 )
Accounts payable
    (31,127 )
Accrued compensation
    (21,202 )
Deferred revenue
    (5,297 )
Other current and long-term liabilities
    (11,592 )
 
     
Total preliminary purchase price allocation
  $ 1,344,427  
 
     
 
Intangible assets consist of customer lists (including existing contractual relationships), purchased technology, trade names and logos, and covenants not to compete. The customer lists intangible assets relate to Digital Insight’s ability to sell existing, in-process and future versions of its products to its existing customers. We amortize purchased intangible assets on a straight-line basis over their respective useful lives. The following table presents the details of the identifiable intangible assets acquired.
             
    Estimated      
    Useful Life      
(Dollars in thousands)   (in Years)   Amount  
 
           
Customer lists
  5   $ 146,000  
Purchased technology
  3     134,800  
Trade names and logos
  5     10,000  
Covenants not to compete
  3     700  
 
         
Total identifiable intangible assets
      $ 291,500  
 
         
 
As a result of our acquisition of Digital Insight, we incurred change in control and severance costs totaling $6.6 million. We paid $5.5 million of those costs in cash during the three months ended April 30, 2007.
Pro Forma Financial Information
The unaudited financial information in the table below summarizes the combined results of operations of Intuit and Digital Insight on a pro forma basis, as though the companies had been combined as of the beginning of each of the periods presented. The pro forma financial information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition and the issuance of $1 billion of related senior notes (see Note 9) had taken place at the beginning of each of the periods presented. The pro forma financial information for all periods presented also includes adjustments to share-based compensation expense for stock options assumed, adjustments to depreciation expense for acquired property and equipment, amortization charges for acquired intangible assets, adjustments to interest income, and related tax effects.
The pro forma financial information for the three months ended April 30, 2007 includes the results of Digital Insight subsequent to February 6, 2007, the date of acquisition. The pro forma financial information for the nine months ended April 30, 2007 combines our results for the nine months ended April 30, 2007, which include the results of Digital Insight subsequent to February 6, 2007, and the historical results for Digital Insight for the six months ended December 31, 2006. The pro forma financial information for the three and nine months ended April 30, 2006 combines our historical results for those periods with the historical results of Digital Insight for the three and nine months ended March 31, 2006.

16


Table of Contents

The following table summarizes the pro forma financial information:
                                 
    Three Months Ended   Nine Months Ended
    April 30,   April 30,   April 30,   April 30,
(In thousands)   2007   2006   2007   2006
 
                               
Total net revenue
  $ 1,154,397     $ 1,010,222     $ 2,404,771     $ 2,166,186  
Net income from continuing operations
    368,351       284,260       425,693       353,984  
Basic net income per share from continuing operations
  $ 1.08     $ 0.83     $ 1.24     $ 1.01  
Diluted net income per share from continuing operations
  $ 1.04     $ 0.80     $ 1.19     $ 0.98  
Other
In March 2007 we announced the mutual termination of a December 2006 agreement to acquire Electronic Clearing House Inc. There were no termination fees due from Intuit as a consequence of the termination of the agreement.
6. Dispositions and Discontinued Operations
Sale of Outsourced Payroll Assets
On March 13, 2007 we sold certain assets related to our Complete Payroll and Premier Payroll Service businesses to ADP for a price of up to approximately $135 million in cash. At the close of the transaction we received an initial payment of $44.8 million from ADP. The final purchase price is contingent upon customers transitioning to ADP. The assets were part of our Payroll and Payments segment. In accordance with the provisions of SFAS 144, “Accounting for the Impairment or Disposal of Long-lived Assets,” we have not accounted for this transaction as a discontinued operation because the operations and cash flows of the assets could not be clearly distinguished, operationally or for financial reporting purposes, from the rest of our outsourced payroll business. We will recognize the net gain on the sale of the assets as customers are transitioned pursuant to the agreement over a period not to exceed one year from the date of the sale. In the three months ended April 30, 2007 we recorded a net gain of $0.4 million in interest and other income in our statement of operations for customers who transitioned to ADP during that period. We held a deposit of $44.3 million in other current liabilities on our balance sheet at April 30, 2007. Assets held for sale at April 30, 2007 consisted of $7.3 million in customer lists and were included in purchased intangible assets on our balance sheet.
Intuit Information Technology Solutions Discontinued Operations
In December 2005 we sold our Intuit Information Technology Solutions (ITS) business for approximately $200 million in cash. The buyer deposited approximately $20 million of the total purchase price in a third-party escrow account to be held through December 2006 to cover breaches of representations and warranties set forth in the purchase agreement, should they arise. We received the full escrow amount in January 2007.
In accordance with the provisions of SFAS 144, “Accounting for the Impairment or Disposal of Long-lived Assets,” we accounted for the sale of ITS as discontinued operations. We have therefore segregated the operating results and cash flows of ITS from continuing operations in our financial statements for all periods prior to the sale. For the nine months ended April 30, 2006, we recorded net revenue from ITS of $20.2 million and net income from ITS operations of $5.2 million. We also recorded a net gain on disposal of ITS of $34.3 million in the nine months ended April 30, 2006. We recorded a net loss of $1.1 million for certain contingent liabilities that became payable to the purchaser of ITS during the three months ended April 30, 2007.
7. Industry Segment and Geographic Information
SFAS 131, “Disclosures about Segments of an Enterprise and Related Information,” establishes standards for the way in which public companies disclose certain information about operating segments in their financial reports. Consistent with SFAS 131, we have defined six reportable segments, described below, based on factors such as how we manage our operations and how our chief operating decision maker views results. We define the chief operating

17


Table of Contents

decision maker as our chief executive officer and our chief financial officer. We have aggregated two operating segments to form our Payroll and Payments reportable segment.
QuickBooks product revenue is derived primarily from QuickBooks desktop software products and financial supplies such as paper checks, envelopes and invoices. QuickBooks service and other revenue is derived primarily from QuickBooks Online Edition, QuickBooks support plans and royalties from small business online services.
Payroll and Payments product revenue is derived primarily from QuickBooks Payroll, a family of products sold on a subscription basis offering payroll tax tables, forms and electronic tax payment and filing to small businesses that prepare their own payrolls. Payroll and Payments service and other revenue is derived from small business payroll services as well as from merchant services such as credit and debit card processing provided by our Innovative Merchant Solutions business. Service and other revenue for this segment also includes interest earned on funds held for payroll customers.
Consumer Tax product revenue is derived primarily from TurboTax federal and state consumer and small business desktop tax return preparation software. Consumer Tax service and other revenue is derived primarily from TurboTax Online tax return preparation services and electronic filing services.
Professional Tax product revenue is derived primarily from Lacerte and ProSeries professional tax preparation software products. Professional Tax service and other revenue is derived primarily from electronic filing services, bank product transmission services and training services.
Financial Institutions service and other revenue is derived primarily from outsourced online banking software products that are hosted in our data centers and delivered as on-demand service offerings to banks, credit unions and savings and loan associations by our Digital Insight business. Financial Institutions service and other revenue also includes connectivity fees from financial institutions.
Other Businesses consist primarily of Quicken and Canada. Quicken product revenue is derived primarily from Quicken desktop software products. Quicken service and other revenue consists primarily of fees from consumer online transactions and from Quicken-branded credit card and bill payment offerings that we provide through our partners. In Canada, product revenue is derived primarily from localized versions of QuickBooks and Quicken as well as QuickTax and TaxWiz consumer desktop tax return preparation software and ProFile professional tax preparation products. Service and other revenue in Canada consists primarily of revenue from payroll services and QuickBooks support plans.
Our QuickBooks, Payroll and Payments, Consumer Tax, Professional Tax and Financial Institutions segments operate primarily in the United States. All of our segments sell primarily to customers located in the United States. International total net revenue was less than 5% of consolidated total net revenue for all periods presented.
We include costs such as corporate general and administrative expenses and share-based compensation expenses that are not allocated to specific segments in a category we call Corporate. The Corporate category also includes amortization of purchased intangible assets, acquisition-related charges, impairment of goodwill and purchased intangible assets, interest expense, interest and other income, and realized net gains or losses on marketable equity securities and other investments.
The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies in Note 1 to the financial statements in our Annual Report on Form 10-K for the fiscal year ended July 31, 2006. Except for goodwill and purchased intangible assets, we do not generally track assets by reportable segment and, consequently, we do not disclose total assets by reportable segment.

18


Table of Contents

The following tables show our financial results by reportable segment for the three and nine months ended April 30, 2007 and 2006. We have combined other revenue with service revenue because other revenue was less than 5% of total net revenue for each of those periods. In February 2007 we completed the acquisition of Digital Insight, a provider of outsourced online banking applications and services to banks, credit unions and savings and loan associations. We combined Digital Insight with our existing financial institutions group, which had been part of our Other Businesses segment, to create a new Financial Institutions segment during the three months ended April 30, 2007. We have reclassified our existing financial institutions business from our Other Businesses segment to our Financial Institutions segment for all periods presented.
                                                                 
            Payroll                                      
            and     Consumer     Professional     Financial     Other              
(In thousands)   QuickBooks     Payments     Tax     Tax     Institutions     Businesses     Corporate     Consolidated  
                   
Three Months Ended
April 30, 2007
                                                               
Product revenue
  $ 132,590     $ 52,782     $ 126,158     $ 116,311     $ 19     $ 61,760     $ —     $ 489,620  
Service and other revenue
    22,146       71,707       441,093       22,188       65,028       42,615       —       664,777  
                   
Total net revenue
    154,736       124,489       567,251       138,499       65,047       104,375       —       1,154,397  
                   
Segment operating
income
    51,456       51,291       459,395       110,704       14,426       40,601       —       727,873  
Common expenses
    —       —       —       —       —       —       (125,631 )     (125,631 )
                   
Subtotal
    51,456       51,291       459,395       110,704       14,426       40,601       (125,631 )     602,242  
Amortization of purchased
intangible assets
    —       —       —       —       —       —       (13,817 )     (13,817 )
Acquisition-related charges
    —       —       —       —       —       —       (9,660 )     (9,660 )
Interest expense
    —       —       —       —       —       —       (12,823 )     (12,823 )
Interest and other income
    —       —       —       —       —       —       10,967       10,967  
Realized net gain on
marketable equity
securities
    —       —       —       —       —       —       347       347  
                   
Income (loss) from
continuing operations
before income taxes
  $ 51,456     $ 51,291     $ 459,395     $ 110,704     $ 14,426     $ 40,601     $ (150,617 )   $ 577,256  
     
                                                                 
            Payroll                                      
            and     Consumer     Professional     Financial     Other              
(In thousands)   QuickBooks     Payments     Tax     Tax     Institutions     Businesses     Corporate     Consolidated  
                   
Three Months Ended
April 30, 2006
                                                               
Product revenue
  $ 108,053     $ 49,395     $ 121,439     $ 83,063     $ 5     $ 58,246     $ —     $ 420,201  
Service and other revenue
    19,264       67,077       377,819       21,657       5,960       40,625       —       532,402  
                   
Total net revenue
    127,317       116,472       499,258       104,720       5,965       98,871       —       952,603  
                   
Segment operating
income
    39,873       48,215       406,099       75,038       2,974       34,865       —       607,064  
Common expenses
    —       —       —       —       —       —       (121,390 )     (121,390 )
                   
Subtotal
    39,873       48,215       406,099       75,038       2,974       34,865       (121,390 )     485,674  
Amortization of purchased
intangible assets
    —       —       —       —       —       —       (2,289 )     (2,289 )
Acquisition-related charges
    —       —       —       —       —       —       (3,278 )     (3,278 )
Interest and other income
    —       —       —       —       —       —       9,070       9,070  
Realized net gain on
marketable equity
securities
    —       —       —       —       —       —       79       79  
                   
Income (loss) from
continuing operations
before income taxes
  $ 39,873     $ 48,215     $ 406,099     $ 75,038     $ 2,974     $ 34,865     $ (117,808 )   $ 489,256  
     

19


Table of Contents

                                                                 
            Payroll                                      
            and     Consumer     Professional     Financial     Other              
(In thousands)   QuickBooks     Payments     Tax     Tax     Institutions     Businesses     Corporate     Consolidated  
                   
Nine Months Ended
April 30, 2007
                                                               
Product revenue
  $ 391,300     $ 154,999     $ 297,759     $ 250,321     $ 65     $ 157,135     $ —     $ 1,251,579  
Service and other revenue
    61,507       233,178       507,779       28,575       76,860       120,297       —       1,028,196  
                   
Total net revenue
    452,807       388,177       805,538       278,896       76,925       277,432       —       2,279,775  
                   
Segment operating
income
    134,539       159,240       536,223       169,226       17,777       83,616       —       1,100,621  
Common expenses
    —       —       —       —       —       —       (375,482 )     (375,482 )
                   
Subtotal
    134,539       159,240       536,223       169,226       17,777       83,616       (375,482 )     725,139  
Amortization of purchased
intangible assets
    —       —       —       —       —       —       (18,708 )     (18,708 )
Acquisition-related charges
    —       —       —       —       —       —       (14,836 )     (14,836 )
Interest expense
    —       —       —       —       —       —       (12,823 )     (12,823 )
Interest and other income
    —       —       —       —       —       —       32,303       32,303  
Realized net gain on
marketable equity
securities
    —       —       —       —       —       —       1,568       1,568  
                   
Income (loss) from
continuing operations
before income taxes
  $ 134,539     $ 159,240     $ 536,223     $ 169,226     $ 17,777     $ 83,616     $ (387,978 )   $ 712,643  
     
                                                                 
            Payroll                                      
            and     Consumer     Professional     Financial     Other              
(In thousands)   QuickBooks     Payments     Tax     Tax     Institutions     Businesses     Corporate     Consolidated  
                   
Nine Months Ended
April 30, 2006
                                                               
Product revenue
  $ 356,674     $ 144,026     $ 263,252     $ 238,157     $ 5     $ 157,620     $ —     $ 1,159,734  
Service and other revenue
    54,236       195,967       434,219       25,983       15,123       114,116       —       839,644  
                   
Total net revenue
    410,910       339,993       697,471       264,140       15,128       271,736       —       1,999,378  
                   
Segment operating
income
    126,313       134,752       488,908       158,156       6,630       73,670       —       988,429  
Common expenses
    —       —       —       —       —       —       (353,380 )     (353,380 )
                   
Subtotal
    126,313       134,752       488,908       158,156       6,630       73,670       (353,380 )     635,049  
Amortization of purchased
intangible assets
    —       —       —       —       —       —       (8,001 )     (8,001 )
Acquisition-related charges
    —       —       —       —       —       —       (10,590 )     (10,590 )
Interest and other income
    —       —       —       —       —       —       20,940       20,940  
Realized net gain on
marketable equity
securities
    —       —       —       —       —       —       7,373       7,373  
                   
Income (loss) from
continuing operations
before income taxes
  $ 126,313     $ 134,752     $ 488,908     $ 158,156     $ 6,630     $ 73,670     $ (343,658 )   $ 644,771  
     

20


Table of Contents

8. Current Liabilities and Commitments
Bridge Credit Facility
In connection with our February 6, 2007 acquisition of Digital Insight (see Note 5), we borrowed $1 billion under a one-year unsecured bridge credit facility with two institutional lenders in order to pay a portion of the purchase price of Digital Insight. This bridge credit facility accrued interest at 5.77%. On March 12, 2007 we retired this bridge credit facility with the proceeds of our issuance of $1 billion in long-term senior unsecured notes. See Note 9.
Unsecured Revolving Credit Facility
On March 22, 2007 we entered into an agreement with certain institutional lenders for a $500 million unsecured revolving credit facility that will expire on March 22, 2012. Advances under the credit facility will accrue interest at rates that are equal to, at our election, either Citibank’s base rate or the London InterBank Offered Rate (LIBOR) plus a margin that ranges from 0.18% to 0.575% based on our senior debt credit ratings. The applicable interest rate will be increased by 0.05% for any period in which the total principal amount of advances and letters of credit under the credit facility exceeds $250 million. The agreement includes covenants that require us to maintain a ratio of total debt to annual earnings before interest, taxes, depreciation and amortization (EBITDA) of not greater than 3.25 to 1.00 and a ratio of annual EBITDA to interest payable of not less than 3.00 to 1.00. We may use amounts borrowed under this credit facility for general corporate purposes or for future acquisitions or expansion of our business. To date we have not borrowed under the credit facility.
Deferred Revenue
In some situations, we receive advance payments from our customers. We also offer multiple element arrangements to our customers. We defer revenue associated with these advance payments and the relative fair value of undelivered elements under multiple element arrangements until we ship the products or perform the services. Deferred revenue consisted of the following at the dates indicated:
                 
    April 30,     July 31,  
(In thousands)   2007     2006  
 
               
Product and product-related services
  $ 214,949     $ 269,867  
Customer support
    29,407       23,246  
 
           
Total deferred revenue
  $ 244,356     $ 293,113  
 
           
 
Other Current Liabilities
Other current liabilities were as follows at the dates indicated:
                 
    April 30,     July 31,  
(In thousands)   2007     2006  
 
               
Reserve for product returns
  $ 73,190     $ 29,385  
Reserve for rebates
    38,282       8,996  
Executive deferred compensation plan
    36,816       27,798  
Interest payable
    7,124       —  
Deposit from acquirer of outsourced payroll assets
    44,312       —  
Other
    52,310       23,112  
 
           
Total other current liabilities
  $ 252,034     $ 89,291  
 
           
 
The balances of several of our other current liabilities, particularly our reserves for product returns and rebates, are affected by the seasonality of our business. See Note 1.

21


Table of Contents

Operating Leases
We lease office facilities and equipment under various operating lease agreements. In November 2006 we entered into an agreement under which we will lease approximately 167,000 square feet of office space in a new building to be constructed by the landlord in Woodland Hills, California for our Innovative Merchant Solutions business. The lease term is 10 years beginning on October 1, 2008. We estimate that our total minimum commitment for this lease is approximately $70 million.
In February 2007 we acquired Digital Insight, whose principal offices occupy approximately 46,000 square feet in Calabasas, California pursuant to a lease that expires on May 31, 2011. Digital Insight also occupies a total of approximately 129,000 square feet of office space in Westlake Village and Sacramento, California and in Athens, Atlanta and Norcross, Georgia. We estimate that at April 30, 2007 our minimum commitments for all Digital Insight operating leases totaled approximately $12 million.
9. Long-Term Debt
Senior Unsecured Notes
In connection with our acquisition of Digital Insight (see Note 5), on March 12, 2007 we issued $500 million of 5.40% senior unsecured notes due on March 15, 2012 (the 2012 Notes) and $500 million of 5.75% senior unsecured notes due on March 15, 2017 (the 2017 Notes) (together, the Notes), for a total principal amount of $1 billion. The Notes are redeemable by Intuit at any time, subject to a make-whole premium. On March 12, 2007 we retired the bridge credit facility described in Note 8 with the proceeds of our issuance of these senior unsecured notes. The Notes include covenants that limit our ability to grant liens on our facilities and to enter into sale and leaseback transactions, subject to significant allowances.
The following table summarizes our senior unsecured notes:
         
    April 30,  
(In thousands)   2007  
 
       
Senior notes:
       
5.40% fixed-rate notes, due 2012
  $ 500,000  
5.75% fixed-rate notes, due 2017
    500,000  
 
     
Total senior notes
    1,000,000  
Unamortized discount
    (2,223 )
 
     
Total
  $ 997,777  
 
     
 
The 2012 Notes have a yield to maturity of 5.401% and the 2017 Notes have a yield to maturity of 5.809%. Interest is payable semiannually on March 15 and September 15 beginning on September 15, 2007. Interest expense is shown as a separate line item in our statements of operations. Interest expense will include the amortization of a total of $7.3 million in debt issuance costs over the terms of the related senior notes. We paid no cash for interest on the Notes during the three and nine months ended April 30, 2007 or 2006.
Derivative Instruments
In December 2006 we entered into a $500 million notional amount five-year forward starting swap and a $500 million notional amount 10-year forward starting swap designated as cash flow hedges of the interest payments on the senior notes described above. Under these interest rate swap contracts, we made fixed-rate interest payments and received variable-rate interest payments based on the London Interbank Offered Rate (LIBOR). The effect of these swaps was to offset changes in the fixed rate between the date we entered into the interest rate swaps and the issuance date of the senior notes. We settled the interest rate swaps on March 7, 2007 for a cumulative gain of $0.7 million which will be amortized using the effective yield method as an adjustment of interest expense over the term of the related debt in our statements of operations. At April 30, 2007, the unamortized gain of $0.7 million was included in other comprehensive income in the stockholders’ equity section of our balance sheet.

22


Table of Contents

10. Income Taxes
We compute our provision for or benefit from income taxes by applying the estimated annual effective tax rate to income or loss from recurring operations and other taxable items. Our effective tax rate for the three and nine months ended April 30, 2007 was approximately 36% and differed from the federal statutory rate due to state income taxes, which were partially offset by the benefit we received from federal and state research and experimental credits and tax exempt interest income. In addition, we benefited from the retroactive extension of the federal research and experimental credit in the nine months ended April 30, 2007. Our effective tax rates for the three and nine months ended April 30, 2006 were approximately 39% and 38% and differed from the federal statutory rate of 35% due to state income taxes, which were partially offset by the benefit we received from federal and state research and experimental credits and tax exempt interest income.
In December 2006 the Tax Relief and Health Care Act of 2006 was signed into law. The Act includes a reinstatement of the federal research and experimental credit retroactive to January 1, 2006. We recorded a discrete tax benefit of approximately $3.7 million for the retroactive amount related to fiscal 2006 during the three months ended January 31, 2007. The credit as reinstated has an expiration date of December 31, 2007.
We acquired Digital Insight on February 6, 2007. See Note 5. Digital Insight has approximately $61 million in federal net operating loss carryforwards. We have recorded the tax effects of these carryforwards, which totaled $24 million, as deferred tax assets. The carryforwards will not result in an income tax provision benefit, but they will reduce income taxes payable and cash paid for income taxes as they are utilized.
In accordance with SFAS 123(R), which we adopted on August 1, 2005, tax savings from expected future deductions based on the expense attributable to our stock option plans are reflected in the federal and state tax provisions for the three and nine months ended April 30, 2007 and 2006.
Tax deductions associated with stock option exercises related to grants vesting prior to August 1, 2005 are credited to stockholders’ equity. Excess tax benefits associated with stock option exercises related to grants vesting on or after August 1, 2005 are also credited to stockholders’ equity. The reductions of income taxes payable resulting from the exercise of employee stock options and other employee stock programs that were credited to stockholders’ equity were approximately $2.7 million and $32.1 million for the three and nine months ended April 30, 2007 and $17.0 million and $46.1 million for the three and nine months ended April 30, 2006.
11. Stockholders’ Equity
Stock Split
Our Board of Directors authorized a two-for-one stock split which was effected in the form of a 100% stock dividend on July 6, 2006. All share and per share figures in the statements of operations and notes to the financial statements retroactively reflect this stock split. This stock split was an equity restructuring that is considered a modification under SFAS 123(R), but it did not result in a change in fair value of any equity awards.
Stock Repurchase Programs
Intuit’s Board of Directors has authorized a series of common stock repurchase programs. Shares of common stock repurchased under these programs become treasury shares. We repurchased 10.4 million and 17.1 million shares for $301.2 million and $506.6 million under these programs during the three and nine months ended April 30, 2007. We repurchased 5.5 million and 15.4 million shares for $285.0 million and $780.0 million under these programs during the three and nine months ended April 30, 2006. No authorized funds remained under our stock repurchase programs at April 30, 2007. On May 17, 2007 we announced a new stock repurchase program under which we are authorized to repurchase up to $800 million of our common stock from time to time over a three-year period ending on May 14, 2010.
Repurchased shares of our common stock are held as treasury shares until they are reissued or retired. When we reissue treasury stock, if the proceeds from the sale are more than the average price we paid to acquire the shares we record an increase in additional paid-in capital. Conversely, if the proceeds from the sale are less than the average price we paid to acquire the shares, we record a decrease in additional paid-in capital to the extent of increases previously recorded for similar transactions and a decrease in retained earnings for any remaining amount.

23


Table of Contents

Share-Based Compensation Plans
Description of Share-Based Compensation Plans
Under our 2005 Equity Incentive Plan, we are permitted to grant incentive and non-qualified stock options, restricted stock awards, RSUs and stock bonus awards to our employees, non-employee directors and consultants. In December 2006 our stockholders authorized an additional 10,000,000 shares for a total of 36,000,000 shares authorized under the 2005 Plan. Up to 50% of equity awards granted each year can be at less than full fair market value. All options granted to date under the 2005 Plan have exercise prices equal to the fair market value of our stock on the date of grant. All RSU’s are considered to be granted at less than the fair market value of our stock on the date of grant because they have no exercise price.
Options granted under the 2005 Plan typically vest over three years based on continued service and have a seven-year term. Prior to the fourth quarter of fiscal 2006, we granted RSUs under the 2005 Plan primarily to certain executive officers. In the fourth quarter of fiscal 2006, the Compensation Committee of our Board of Directors approved the use of RSUs for employees at all job levels in order to provide a competitive form of equity incentive that would have value regardless of fluctuations in Intuit’s stock price. RSUs granted under the 2005 Plan typically vest over three years based on continued service and are payable in shares of our common stock upon vesting. RSUs granted to certain executive officers are subject to the achievement of performance goals established by the Compensation Committee, including targets based upon both Intuit’s net revenue and operating income. Outstanding awards that were originally granted under several predecessor plans also remain in effect in accordance with their terms. In addition, we maintain an Employee Stock Purchase Plan that was amended in December 2006 to increase the total shares available for issuance to 13,800,000 shares. The 2005 Plan, its predecessor plans and our Employee Stock Purchase Plan are described more fully in our Annual Report on Form 10-K for the fiscal year ended July 31, 2006.
Share-Based Compensation Expense
The following table summarizes the total share-based compensation expense for stock options, restricted stock awards, RSUs and our Employee Stock Purchase Plan that we recorded for continuing operations for the periods shown. The share-based compensation expense that we recorded for discontinued operations for the three and nine months ended April 30, 2006 was nominal.
                                 
    Three Months Ended     Nine Months Ended  
    April 30,     April 30,     April 30,     April 30,  
(In thousands, except per share amounts)   2007     2006     2007     2006  
 
                               
Cost of product revenue
  $ 135     $ 211     $ 615     $ 744  
Cost of service and other revenue
    1,105       456       2,366       1,589  
Selling and marketing
    7,002       5,572       18,499       17,129  
Research and development
    5,623       4,609       16,485       14,903  
General and administrative
    6,720       6,343       20,791       20,999  
 
                       
Decrease in operating income from continuing operations and income from continuing operations before income taxes
    20,585       17,191       58,756       55,364  
Income tax benefit
    (4,590 )     (5,916 )     (18,240 )     (19,941 )
 
                       
Decrease in net income from continuing operations
  $ 15,995     $ 11,275     $ 40,516     $ 35,423  
 
                       
 
                               
Decrease in net income per share from continuing operations:
                               
Basic
  $ 0.05     $ 0.03     $ 0.12     $ 0.10  
 
                       
Diluted
  $ 0.05     $ 0.03     $ 0.11     $ 0.10  
 
                       
 
At April 30, 2007, there was $137.0 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under all equity compensation plans which we expect to recognize as

24


Table of Contents

expense in the future. Total unrecognized compensation cost will be adjusted for future changes in estimated forfeitures. We expect to recognize that cost over a weighted average vesting period of 1.9 years.
Distribution and Dilutive Effect of Options
The following table shows certain information about net grants of options and RSUs as well as grants to Named Executives for the periods indicated. We define net grants as options granted less options canceled or expired and RSUs granted less RSUs canceled or expired. Named Executives are defined as our chief executive officer and each of the four other most highly compensated executive officers during the fiscal periods presented. Options and RSUs granted to our Named Executives as a percentage of total options granted may vary significantly from quarter to quarter, due in part to the timing of annual performance-based grants to Named Executives.
                         
    Nine    
    Months    
    Ended   Twelve Months Ended
    April 30,   July 31,   July 31,
    2007   2006   2005
Net grants of options and RSUs during the period as a percentage of outstanding shares
    0.7 %     2.3 %     1.8 %
Grants to Named Executives during the period as a percentage of total grants
    4.4 %     3.1 %     6.2 %
Grants to Named Executives during the period as a percentage of outstanding shares
    0.1 %     0.1 %     0.2 %
Options and RSUs held by Named Executives as a percentage of total options and RSUs outstanding
    16.4 %     14.1 %     13.0 %
 
12. Litigation
Muriel Siebert & Co., Inc. v. Intuit Inc., Index No. 03-602942, Supreme Court of the State of New York, County of New York
On September 17, 2003 Muriel Siebert & Co., Inc. filed a complaint against Intuit alleging various claims for breach of contract, breach of express and implied covenants of good faith and fair dealing, breach of fiduciary duty, misrepresentation and/or fraud, and promissory estoppel. The allegations relate to Quicken Brokerage powered by Siebert, a strategic alliance between the two companies. The complaint seeks compensatory damages of up to $11.1 million, punitive damages of up to $33.0 million, and other damages. Intuit unsuccessfully sought to compel the matter to arbitration. On February 7, 2005 Intuit filed a motion to dismiss all but one of the plaintiff’s claims in New York state court. On September 6, 2005 the court dismissed Siebert’s fraud and punitive damages claims. On May 8, 2007 the Court of Appeals of the State of New York resolved in Intuit’s favor a motion by Siebert to disqualify Intuit’s counsel, and the case is now proceeding again in the trial court. No trial date has yet been set. Intuit believes this lawsuit is without merit and will vigorously defend the litigation.
Other Litigation Matters
Intuit is subject to certain routine legal proceedings, as well as demands, claims and threatened litigation, that arise in the normal course of our business, including assertions that we may be infringing patents or other intellectual property rights of others. We currently believe that the ultimate amount of liability, if any, for any pending claims of any type (either alone or combined) will not materially affect our financial position, results of operations or cash flows. The ultimate outcome of any litigation is uncertain and, regardless of outcome, litigation can have an adverse impact on Intuit because of defense costs, negative publicity, diversion of management resources and other factors. Our failure to obtain necessary license or other rights, or litigation arising out of intellectual property claims, could adversely affect our business.

25


Table of Contents

13. Related Party Transactions
Repurchase of Vested Restricted Stock
On February 27, 2007 we entered into a share repurchase agreement with Stephen M. Bennett, our president and chief executive officer. Pursuant to this agreement we repurchased 5,362 shares of Intuit common stock from Mr. Bennett at a price of $29.48 per share, which was the closing price per share of our common stock on The Nasdaq Stock Market on February 27, 2007. The entire repurchase price was remitted to federal and state taxing authorities to satisfy Mr. Bennett’s federal, state and Medicare tax withholding obligations resulting from the vesting of 15,000 shares of Intuit common stock under his January 2000 new-hire restricted stock awards. This repurchase was approved by the Compensation Committee and the Audit Committee of our Board of Directors, which consist solely of independent directors.

26


Table of Contents

ITEM 2
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Our Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) includes the following sections:
  •   Executive Overview that discusses at a high level our operating results and some of the trends that affect our business.
 
  •   Significant changes since our most recent Annual Report on Form 10-K in the Critical Accounting Policies and Estimates that we believe are important to understanding the assumptions and judgments underlying our financial statements.
 
  •   Results of Operations that begins with an overview followed by a more detailed discussion of our revenue and expenses.
 
  •   Liquidity and Capital Resources which discusses key aspects of our statements of cash flows, changes in our balance sheets and our financial commitments.
You should note that this MD&A discussion contains forward-looking statements that involve risks and uncertainties. Please see Item 1A in Part II of this Quarterly Report on Form 10-Q for important information to consider when evaluating such statements.
You should read this MD&A in conjunction with the financial statements and related notes in Item 1 and our Annual Report on Form 10-K for the fiscal year ended July 31, 2006. As discussed below, in February 2007 we completed the acquisition of Digital Insight Corporation for a total purchase price of approximately $1.34 billion. Accordingly, we have included Digital Insight’s results of operations in our consolidated results of operations from the date of acquisition. We also sold our Intuit Information Technology Solutions (ITS) business in December 2005. We accounted for this business as a discontinued operation and have accordingly reclassified our financial statements for all periods prior to the sale to reflect ITS as discontinued operations. Unless noted otherwise, the following discussion pertains only to our continuing operations.
Our Board of Directors authorized a two-for-one stock split which was effected in the form of a 100% stock dividend on July 6, 2006. All share and per share figures in this MD&A and the statements of operations and the notes to the financial statements in Item 1 retroactively reflect this stock split.
Executive Overview
This overview provides a high level discussion of our operating results and some of the trends that affect our business. We believe that an understanding of these trends is important in order to understand our financial results for the third quarter and first nine months of fiscal 2007 as well as our future prospects. This summary is not intended to be exhaustive, nor is it intended to be a substitute for the detailed discussion and analysis provided elsewhere in this Quarterly Report on Form 10-Q.
About Intuit
Intuit is a leading provider of business, financial management and tax solutions for small businesses, consumers and accounting professionals. Intuit also provides outsourced online banking applications and services to banks, credit unions and savings and loan associations. We organize our business into the following six segments:
  •   Our QuickBooks segment includes QuickBooks accounting and business management software and technical support as well as financial supplies for small businesses.
 
  •   Our Payroll and Payments segment includes small business payroll products and services and merchant services such as credit and debit card processing provided by our Innovative Merchant Solutions business.
 
  •   Consumer Tax includes our TurboTax consumer and small business tax return preparation products and services.
 
  •   Professional Tax includes our Lacerte and ProSeries professional tax products and services.
 
  •   Financial Institutions includes outsourced online banking applications and services for banks, credit unions and savings and loan associations provided by our Digital Insight business.
 
  •   Other Businesses includes our Quicken personal finance products and services, Intuit Real Estate Solutions, Intuit Distribution Management Solutions, and our businesses in Canada and the United Kingdom.

27


Table of Contents

In February 2007 we completed the acquisition of Digital Insight, a provider of outsourced online banking applications and services to banks, credit unions and savings and loan associations. We combined Digital Insight with our existing financial institutions group, which had been part of our Other Businesses segment, to create a new Financial Institutions segment during the third quarter of fiscal 2007.
Seasonality
Our QuickBooks, Consumer Tax and Professional Tax businesses are highly seasonal. Some of our other offerings are also seasonal, but to a lesser extent. Revenue from many of our small business software products, including QuickBooks, tends to be at its peak around calendar year end, although the timing of new product releases or changes in our offerings can materially shift revenue between quarters. Sales of income tax preparation products and services are heavily concentrated in the period from November through April. As a result, our total net revenue is usually highest during our second quarter ending January 31 and third quarter ending April 30. We typically report losses in our first quarter ending October 31 and fourth quarter ending July 31, when revenue from our tax businesses is minimal while operating expenses continue at relatively consistent levels. We believe the seasonality of our revenue is likely to continue in the future. In MD&A we often focus on year-to-date results for our seasonal businesses as they are generally more meaningful than quarterly results.
Overview of Financial Results
Total net revenue for the first nine months of fiscal 2007 was $2.280 billion, up 14% compared with the first nine months of fiscal 2006. The fiscal 2007 revenue increase was due to revenue growth in our Consumer Tax, Payroll and Payments, and QuickBooks segments and to our February 2007 acquisition of Digital Insight. Digital Insight became part of our new Financial Institutions segment. Excluding revenue from our Financial Institutions segment, total net revenue for the first nine months of fiscal 2007 increased 11% compared with the same period of fiscal 2006.
Operating income from continuing operations of $691.6 million for the first nine months of fiscal 2007 increased 12% compared with $616.5 million for the first nine months of fiscal 2006. Fiscal 2007 revenue growth was partially offset by higher total operating costs and expenses. Higher operating expenses in the first nine months of fiscal 2007 reflect our acquisition of Digital Insight, continued investment in research and development for existing small business and Consumer Tax offerings and for new offerings as well as increases in advertising and other marketing spending to support the launch of our QuickBooks and Consumer Tax offerings.
Net income from continuing operations of $454.8 million for the first nine months of fiscal 2007 increased 15% compared with $396.3 million for the first nine months of fiscal 2006. Interest expense on the debt we issued in connection with our acquisition of Digital Insight was offset by higher interest income. Our effective tax rates for the first nine months of fiscal 2007 and fiscal 2006 were approximately 36% and 38%. Diluted net income per share from continuing operations of $1.27 for the first nine months of fiscal 2007 increased 17% compared with $1.09 for the same period of fiscal 2006. Average shares outstanding declined as a result of repurchases of common stock under our stock repurchase programs, partially offset by the issuance of shares in connection with our employee stock plans.
On February 6, 2007 we completed the acquisition of Digital Insight for a total purchase price of approximately $1.34 billion. In order to finance a portion of this transaction, on February 6, 2007 we borrowed $1 billion under a bridge credit facility, which we retired on March 12, 2007 with the proceeds of our issuance of $1 billion in senior notes. We funded the remainder of the purchase price with our existing cash balances. Our future operating results will reflect interest expense related to the senior notes.
In March 2007 we announced the mutual termination of a December 2006 agreement to acquire Electronic Clearing House Inc. There were no termination fees due from Intuit as a consequence of the termination of the agreement.
On March 13, 2007 we completed the sale of certain assets related to our Complete Payroll and Premier Payroll Service businesses to Automatic Data Processing, Inc. (ADP) for a price of up to approximately $135 million in cash. At the close of the transaction we received an initial payment of $44.8 million from ADP. The final purchase price is contingent upon customers transitioning to ADP. We will recognize the net gain on the sale of the assets as customers are transitioned pursuant to the agreement over a period not to exceed one year from the date of the sale. We recognized a net gain of $0.4 million on the sale of the assets in the third quarter of fiscal 2007.

28


Table of Contents

We ended the third quarter of fiscal 2007 with cash and investments totaling $1.4 billion. In the first nine months of fiscal 2007 we generated cash from operations, from the issuance of long-term debt and, to a lesser extent, from the issuance of common stock under employee stock plans. During the same period we used cash for the purchase of Digital Insight and for purchases of property and equipment. We also repurchased 17.1 million shares of our common stock for $506.6 million under our stock repurchase programs during the first nine months of fiscal 2007. At April 30, 2007, no authorized funds remained available for stock repurchases. On May 17, 2007 we announced a new stock repurchase program under which we are authorized to repurchase up to $800 million of our common stock from time to time over a three-year period ending on May 14, 2010.
On March 22, 2007 we entered into an agreement with certain institutional lenders for a $500 million unsecured revolving credit facility that will expire on March 22, 2012. We may use amounts borrowed under this credit facility for general corporate purposes or for future acquisitions or expansion of our business. To date we have not borrowed under the credit facility, but we may borrow under the credit facility from time to time as opportunities and needs arise. See “Liquidity and Capital Resources – Unsecured Revolving Credit Facility” below for more information.
Critical Accounting Policies and Estimates
In preparing our financial statements, we make estimates, assumptions and judgments that can have a significant impact on our net revenue, operating income or loss and net income or loss, as well as on the value of certain assets and liabilities on our balance sheet. We believe that the estimates, assumptions and judgments involved in the accounting policies described in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended July 31, 2006 and in “Purchase Accounting” below have the greatest potential impact on our financial statements, so we consider them to be our critical accounting policies and estimates. Except as discussed in “Accounting for Share-Based Compensation” below, we believe that during the first nine months of fiscal 2007 there were no significant changes in those critical accounting policies and estimates. Senior management has reviewed the development and selection of our critical accounting policies and estimates and their disclosure in this Quarterly Report on Form 10-Q with the Audit Committee of our Board of Directors.
Purchase Accounting
Under the purchase method of accounting, we allocate the purchase price of acquired companies to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values. We record the excess of purchase price over the aggregate fair values as goodwill. We engage third-party appraisal firms to assist us in determining the fair values of assets acquired and liabilities assumed. These valuations require us to make significant estimates and assumptions, especially with respect to intangible assets. Critical estimates in valuing purchased technology, customer lists and other identifiable intangible assets include future cash flows that we expect to generate from the acquired assets. If the subsequent actual results and updated projections of the underlying business activity change compared with the assumptions and projections used to develop these values, we could experience impairment charges. In addition, we have estimated the economic lives of certain acquired assets and these lives are used to calculate depreciation and amortization expense. If our estimates of the economic lives change, depreciation or amortization expenses could be accelerated.
Accounting for Share-Based Compensation
Effective August 1, 2006, we began using a lattice binomial model to estimate the fair value of stock options granted. Prior to that date we used the Black Scholes valuation model. This change did not have a material impact on our financial position, results of operations or cash flows. Our stock options have various restrictions, including vesting provisions and restrictions on transfer, and are often exercised prior to their contractual maturity. We therefore believe that lattice binomial models are more capable of incorporating the features of our stock options than closed-form models such as the Black Scholes model. The use of a lattice binomial model requires the use of extensive actual employee exercise behavior data and the use of a number of complex assumptions including the expected volatility of our stock price over the term of the options, risk-free interest rates and expected dividends. We may elect to use different assumptions in our lattice binomial option valuation model in the future, which could materially affect our net income or loss and net income or loss per share.

29


Table of Contents

Results of Operations
Financial Overview
                                                                 
(Dollars in millions,                                   YTD   YTD        
 except per   Q3   Q3   $   %   Q3   Q3   $   %
 share amounts)   FY07   FY06   Change   Change   FY07   FY06   Change   Change
 
                                                               
Total net revenue
  $ 1,154.4     $ 952.6     $ 201.8       21 %   $ 2,279.8     $ 1,999.4     $ 280.4       14 %
Operating income from continuing operations
    578.8       480.1       98.7       21 %     691.6       616.5       75.1       12 %
Net income from continuing operations
    368.4       298.6       69.8       23 %     454.8       396.3       58.5       15 %
Diluted net income per share from continuing operations
  $ 1.04     $ 0.84     $ 0.20       24 %   $ 1.27     $ 1.09     $ 0.18       17 %
Net cash provided by operating activities of continuing operations
  $ 708.2     $ 659.0     $ 49.2       7 %   $ 814.7     $ 731.6     $ 83.1       11 %
 
Total net revenue increased $201.8 million or 21% in the third quarter of fiscal 2007 compared with the third quarter of fiscal 2006. Total net revenue was higher in the third quarter of fiscal 2007 due to revenue growth in our Consumer Tax, Professional Tax, and QuickBooks segments and to our acquisition of Digital Insight. Digital Insight became part of our new Financial Institutions segment. Excluding revenue from our Financial Institutions segment, total net revenue for the third quarter of fiscal 2007 increased 15% compared with the same period of fiscal 2006. Consumer Tax revenue increased $68.0 million or 14% in the third quarter of fiscal 2007 due to growth in federal online units and to price increases. Professional Tax revenue increased $33.8 million or 32% in the third quarter of fiscal 2007 due to the deferral of approximately $29 million in revenue from the second quarter of fiscal 2007 to the third quarter of fiscal 2007. This was approximately $27 million more than we deferred from the second quarter to the third quarter of fiscal 2006. QuickBooks segment revenue increased $27.5 million or 22% in the third quarter of fiscal 2007 due to unit growth and favorable product mix.
Total net revenue increased $280.4 million or 14% in the first nine months of fiscal 2007 compared with the same period of fiscal 2006. Total net revenue was higher in the first nine months of fiscal 2007 due to revenue growth in our Consumer Tax, Payroll and Payments, and QuickBooks segments and to our acquisition of Digital Insight. Excluding revenue from our Financial Institutions segment, total net revenue for the first nine months of fiscal 2007 increased 11% compared with the same period of fiscal 2006. Consumer Tax revenue increased $108.2 million or 15% in the first nine months of fiscal 2007 due to 17% growth in federal online units, excluding units donated through the Free File Alliance, and to price increases. Payroll and Payments revenue increased $48.2 million or 14% in the first nine months of fiscal 2007 due to growth in the QuickBooks Payroll and Payments customer bases, favorable Payroll product mix and higher transaction volume per customer in our Payments business. QuickBooks segment revenue increased $41.9 million or 10% in the first nine months of fiscal 2007 due to unit growth and favorable product mix. See “Total Net Revenue by Business Segment” below for more information.
Higher revenue in the third quarter and first nine months of fiscal 2007 was partially offset by higher expenses, including year to date expense increases of approximately $61 million for advertising and other selling and marketing expenses, approximately $60 million for product development, approximately $48 million for cost of revenue associated with our revenue growth and approximately $21 million for general and administrative expenses. See “Operating Expenses” below for more information.
Net income from continuing operations increased $69.8 million or 23% in the third quarter of fiscal 2007 and $58.5 million or 15% in the first nine months of fiscal 2007. Interest expense on the debt we issued in connection with our February 2007 acquisition of Digital Insight was offset by higher interest income in the third quarter of fiscal 2007 compared with the third quarter of fiscal 2006. Interest income increased in the third quarter and first nine months of

30


Table of Contents

fiscal 2007 compared with the same periods of fiscal 2006 due to higher interest rates and higher average invested balances. Our effective tax rates for the third quarters of fiscal 2007 and 2006 were approximately 36% and 39% and our effective tax rates for the first nine months of fiscal 2007 and 2006 were approximately 36% and 38%. Our effective tax rates for these periods differed from the federal statutory rate of 35% due to state income taxes, which were partially offset by the benefit we received from federal and state research and experimental credits and tax exempt interest income. In addition, we benefited from the retroactive extension of the federal research and experimental credit in the first nine months of fiscal 2007.
Diluted net income per share from continuing operations increased 24% to $1.04 in the third quarter of fiscal 2007 and 17% to $1.27 in the first nine months of fiscal 2007. Average shares outstanding declined during the first nine months of fiscal 2007 as a result of repurchases of 17.1 million shares of common stock under our stock repurchase programs, partially offset by the issuance of 7.8 million shares in connection with our employee stock plans.
At April 30, 2007, our cash, cash equivalents and investments totaled $1.4 billion, an increase of $167.9 million from July 31, 2006. In the first nine months of fiscal 2007, we generated $814.7 million in cash from our continuing operations and received approximately $1 billion in cash from the issuance of long-term debt and $150.9 million in cash from the issuance of common stock under employee stock plans. During the same period we used approximately $1.2 billion in cash for the purchase of Digital Insight (net of cash acquired) and $89.3 million in cash for purchases of property and equipment. We also repurchased 17.1 million shares of our common stock for $506.6 million under our stock repurchase programs during the first nine months of fiscal 2007. No authorized funds remained available for stock repurchases at April 30, 2007. On May 17, 2007 we announced a new stock repurchase program under which we are authorized to repurchase up to $800 million of our common stock from time to time over a three-year period ending on May 14, 2010.

31


Table of Contents

Total Net Revenue by Business Segment
The table below and the discussion of net revenue by business segment that follows it are organized in accordance with our six reportable business segments. We have combined other revenue with service revenue because other revenue was less than 5% of total net revenue for the third quarter and first nine months of fiscal 2007 and 2006. In February 2007 we completed the acquisition of Digital Insight, a provider of outsourced online banking applications and services to banks, credit unions and savings and loan associations. We combined Digital Insight with our existing financial institutions group, which had been part of our Other Businesses segment, to create a new Financial Institutions segment during the third quarter of fiscal 2007. We have reclassified our existing financial institutions business from our Other Businesses segment to our Financial Institutions segment for all periods presented. See Note 7 to the financial statements in Item 1 for descriptions of product revenue and service and other revenue for each segment.
                                                                                 
            % of             % of                     % of             % of        
            Total             Total             YTD     Total     YTD     Total        
    Q3     Net     Q3     Net     %     Q3     Net     Q3     Net     %  
(Dollars in millions)   FY07     Revenue     FY06     Revenue     Change     FY07     Revenue     FY06     Revenue     Change  
 
                                                                               
QuickBooks
                                                                               
Product revenue
  $ 132.6             $ 108.0                     $ 391.3             $ 356.7                  
Service and other revenue
    22.2               19.3                       61.5               54.2                  
 
                                                                       
Subtotal
    154.8       13 %     127.3       13 %     22 %     452.8       20 %     410.9       20 %     10 %
 
                                                                       
 
                                                                               
Payroll and Payments
                                                                               
Product revenue
    52.8               49.4                       155.0               144.0                  
Service and other revenue
    71.7               67.1                       233.2               196.0                  
 
                                                                       
Subtotal
    124.5       11 %     116.5       12 %     7 %     388.2       17 %     340.0       17 %     14 %
 
                                                                       
 
                                                                               
Consumer Tax
                                                                               
Product revenue
    126.1               121.4                       297.9               263.2                  
Service and other revenue
    441.1               377.8                       507.7               434.2                  
 
                                                                       
Subtotal
    567.2       49 %     499.2       52 %     14 %     805.6       35 %     697.4       35 %     15 %
 
                                                                       
 
                                                                               
Professional Tax
                                                                               
Product revenue
    116.3               83.1                       250.3               238.2                  
Service and other revenue
    22.2               21.6                       28.6               26.0                  
 
                                                                       
Subtotal
    138.5       12 %     104.7       11 %     32 %     278.9       12 %     264.2       13 %     6 %
 
                                                                       
 
                                                                               
Financial Institutions
                                                                               
Product revenue
    —               —                       —               —                  
Service and other revenue
    65.0               6.0                       76.9               15.1                  
 
                                                                       
Subtotal
    65.0       6 %     6.0       1 %     983 %     76.9       4 %     15.1       1 %     409 %
 
                                                                       
 
                                                                               
Other Businesses
                                                                               
Product revenue
    61.8               58.3                       157.1               157.6                  
Service and other revenue
    42.6               40.6                       120.3               114.2                  
 
                                                                       
Subtotal
    104.4       9 %     98.9       11 %     6 %     277.4       12 %     271.8       14 %     2 %
 
                                                                       
 
                                                                               
Total Company
                                                                               
Product revenue
    489.6               420.2                       1,251.6               1,159.7                  
Service and other revenue
    664.8               532.4                       1,028.2               839.7                  
 
                                                             
Total net revenue
  $ 1,154.4       100 %   $ 952.6       100 %     21 %   $ 2,279.8       100 %   $ 1,999.4       100 %     14 %
 
                                                               

32


Table of Contents

QuickBooks
QuickBooks segment net revenue increased $27.5 million or 22% in the third quarter of fiscal 2007 and $41.9 million or 10% in the first nine months of fiscal 2007 compared with the same periods of fiscal 2006. Total QuickBooks software unit sales increased 20% and 8% in the third quarter and first nine months of fiscal 2007 compared with the same periods of fiscal 2006 due in part to new promotions, including our first-ever QuickBooks television advertisements. Revenue growth in the fiscal 2007 periods was also driven by favorable product mix, with QuickBooks Premier units increasing 23% and 25% in the third quarter and first nine months of fiscal 2007.
Payroll and Payments
Payroll and Payments net revenue increased $8.0 million or 7% in the third quarter of fiscal 2007 compared with the third quarter of fiscal 2006. In our Payments business, merchant services revenue increased 27% in the third quarter of fiscal 2007 due to 23% growth in the customer base and 8% higher transaction volume per customer. Merchant services revenue growth slowed in the third quarter of fiscal 2007 compared with the first and second quarters of fiscal 2007 due to new customer acquisition remaining relatively constant on a larger customer base. Revenue growth in Payroll and Payments in the third quarter of fiscal 2007 would have been approximately 13% if the sale of portions of our Complete Payroll and Premier Payroll Services customer base to ADP had not occurred.
Payroll and Payments net revenue increased $48.2 million or 14% in the first nine months of fiscal 2007 compared with the same period of fiscal 2006. In our Payments business, merchant services revenue increased 37% in the first nine months of fiscal 2007 due to 17% growth in the customer base and higher transaction volume per customer. Small business payroll revenue grew 6% in that period due to 5% growth in the customer base and, to a lesser extent, to favorable product mix that resulted in higher revenue per customer. Revenue growth in Payroll and Payments in the first nine months of fiscal 2007 would have been approximately 16% if the sale of portions of our Complete Payroll and Premier Payroll Services customer base to ADP had not occurred.
Consumer Tax
Consumer Tax net revenue increased $68.0 million or 14% in the third quarter of fiscal 2007 and $108.2 million or 15% in the first nine months of fiscal 2007 compared with the same periods of fiscal 2006 due to 17% growth in federal online units, excluding units donated through the Free File Alliance, and to price increases. Consumer Tax total net revenue for the fiscal 2007 periods included the impact of approximately $10 million in refunds to customers who experienced delays in electronically preparing or filing their income tax returns on April 17, 2007.
Professional Tax
Professional Tax net revenue increased $33.8 million or 32% in the third quarter of fiscal 2007 and $14.7 million or 6% in the first nine months of fiscal 2007 compared with the same periods of fiscal 2006. We estimate that changes in our Professional Tax offerings and delay of delivery of certain product elements for the 2006 tax year caused approximately $29 million in revenue to be deferred from the second quarter to the third quarter of fiscal 2007. This was approximately $27 million more than we deferred from the second quarter to the third quarter of fiscal 2006.
Financial Institutions
Financial Institutions net revenue increased $59.0 million to $65.0 million in the third quarter of fiscal 2007 and increased $61.8 million to $76.9 million in the first nine months of fiscal 2007 compared with the same periods of fiscal 2006. The revenue increases for the fiscal 2007 periods were almost entirely due to our February 2007 acquisition of Digital Insight.
Other Businesses
Other Businesses net revenue increased $5.5 million or 6% in the third quarter of fiscal 2007 and $5.6 million or 2% in the first nine months of fiscal 2007 compared with the same periods of fiscal 2006. In the first nine months of fiscal 2007, Quicken revenue decreased modestly while revenue from our business in Canada increased modestly and revenue from our Intuit Real Estate Solutions business grew 21%. Revenue for this segment grew 8% in the first nine months of fiscal 2007 when revenue from our MasterBuilder business, which we sold in May 2006, is excluded from fiscal 2006 revenue.

33


Table of Contents

Cost of Revenue
                                                                 
            % of             % of     YTD     % of     YTD     % of  
    Q3     Related     Q3     Related     Q3     Related     Q3     Related  
(Dollars in millions)   FY07     Revenue     FY06     Revenue     FY07     Revenue     FY06     Revenue  
 
                                                               
Cost of product revenue
  $ 43.7       9 %   $ 43.7       10 %   $ 149.3       12 %   $ 147.8       13 %
Cost of service and other revenue
    95.1       14 %     64.3       12 %     233.8       23 %     186.9       22 %
Amortization of purchased intangible assets
    13.8       n/a       2.3       n/a       18.7       n/a       8.0       n/a  
 
                                                       
Total cost of revenue
  $ 152.6       13 %   $ 110.3       12 %   $ 401.8       18 %   $ 342.7       17 %
 
                                                       
 
Cost of service and other revenue as a percentage of service and other revenue increased to 14% in the third quarter of fiscal 2007 from 12% in the third quarter of fiscal 2006. The impact of growth in TurboTax Online and electronic tax filing services, which have relatively lower costs of revenue, was more than offset by the impact of our acquisition of Digital Insight, which has relatively higher costs of revenue. Excluding our Financial Institutions segment, cost of service and other revenue as a percentage of service and other revenue decreased one percentage point to 11% in the third quarter of fiscal 2007.
Amortization of purchased intangible assets increased in the third quarter and first nine months of fiscal 2007 compared with the same periods of fiscal 2006 due to the amortization of purchased intangible assets that we acquired in connection with our February 2007 acquisition of Digital Insight. See Note 5 to the financial statements in Item 1.
Operating Expenses
                                                                 
            % of             % of             % of             % of  
            Total             Total     YTD     Total     YTD     Total  
    Q3     Net     Q3     Net     Q3     Net     Q3     Net  
(Dollars in millions)   FY07     Revenue     FY06     Revenue     FY07     Revenue     FY06     Revenue  
 
                                                               
Selling and marketing
  $ 216.5       19 %   $ 187.7       20 %   $ 593.1       26 %   $ 532.0       26 %
Research and development
    119.1       10 %     97.3       10 %     354.8       15 %     294.7       15 %
General and administrative
    77.7       7 %     74.0       8 %     223.7       10 %     202.9       10 %
Acquisition-related charges
    9.7       1 %     3.3       0 %     14.8       1 %     10.6       1 %
 
                                               
Total operating expenses
  $ 423.0       37 %   $ 362.3       38 %   $ 1,186.4       52 %   $ 1,040.2       52 %
 
                                               
 
Total operating expenses as a percentage of total net revenue declined slightly to 37% in the third quarter of fiscal 2007 compared with 38% in the third quarter of fiscal 2006 and were unchanged at 52% in the first nine months of fiscal 2007 compared with the same period of fiscal 2006. Total operating expenses in dollars increased $146.2 million in the first nine months of fiscal 2007, approximately $28 million of which was due to our February 2007 acquisition of Digital Insight.
Including Digital Insight, approximately 42% of the fiscal 2007 increase in total operating expenses was due to higher selling and marketing expenses that included increases in radio, television and online advertising expenses for our Consumer Tax and QuickBooks offerings as well as additional investments in direct marketing and product management. Approximately 41% of the fiscal 2007 increase in total operating expenses was due to higher research and development expenses. During the first nine months of fiscal 2007, we continued to invest in research and development for existing QuickBooks, Payroll and Payments, Consumer Tax and Financial Institutions offerings as well as for new offerings. We expect that our fiscal 2007 research and development expenses as a percentage of total net revenue will be higher than they were in fiscal 2006. About 14% of the fiscal 2007 increase in total operating expenses was due to $21 million higher general and administrative expenses that included approximately $9 million for fees associated with the resolution of certain legal matters and discretionary items in the first quarter of fiscal 2007.

34


Table of Contents

Acquisition-related charges increased in the third quarter and first nine months of fiscal 2007 compared with the same periods of fiscal 2006 due to the amortization of purchased intangible assets that we acquired in connection with our February 2007 acquisition of Digital Insight. See Note 5 to the financial statements in Item 1.
Segment Operating Income
Segment operating income or loss is segment net revenue less segment cost of revenue and operating expenses. Segment expenses do not include certain costs, such as corporate general and administrative expenses and share-based compensation expenses, which are not allocated to specific segments. These unallocated costs totaled $125.6 million and $121.4 million in the third quarters of fiscal 2007 and 2006 and $375.5 million and $353.4 million in the first nine months of fiscal 2007 and 2006. Segment expenses also do not include amortization of purchased intangible assets, acquisition-related charges and impairment of goodwill and purchased intangible assets. In addition, segment expenses do not include interest expense, interest and other income and realized net gains or losses on marketable equity securities and other investments. See Note 7 to the financial statements in Item 1 for reconciliations of total segment operating income or loss to income or loss from continuing operations before income taxes for each fiscal period presented.
                                                                 
            % of             % of     YTD     % of     YTD     % of  
    Q3     Related     Q3     Related     Q3     Related     Q3     Related  
(Dollars in millions)   FY07     Revenue     FY06     Revenue     FY07     Revenue     FY06     Revenue  
 
                                                               
QuickBooks
  $ 51.5       33 %   $ 39.9       31 %   $ 134.5       30 %   $ 126.3       31 %
Payroll and Payments
    51.3       41 %     48.2       41 %     159.3       41 %     134.7       40 %
Consumer Tax
    459.4       81 %     406.1       81 %     536.2       67 %     488.9       70 %
Professional Tax
    110.7       80 %     75.0       72 %     169.2       61 %     158.2       60 %
Financial Institutions
    14.4       22 %     3.0       50 %     17.8       23 %     6.6       44 %
Other Businesses
    40.6       39 %     34.9       35 %     83.6       30 %     73.7       27 %
 
                                                       
Total segment operating income
  $ 727.9       63 %   $ 607.1       64 %   $ 1,100.6       48 %   $ 988.4       49 %
 
                                                       
 
QuickBooks
QuickBooks segment operating income as a percentage of related revenue increased to 33% in the third quarter of fiscal 2007 from 31% in the third quarter of fiscal 2006 and decreased to 30% in the first nine months of fiscal 2007 from 31% in the first nine months of fiscal 2006. The $41.9 million growth in QuickBooks segment revenue in the first nine months of fiscal 2007 was partially offset by higher expenses, including increases of approximately $6 million for cost of revenue, approximately $12 million for selling and marketing expenses (which consisted primarily of higher radio and television advertising expenses and additional investments in direct marketing and product management) and approximately $14 million for product development expenses in that period.
Payroll and Payments
Payroll and Payments segment operating income as a percentage of related revenue remained unchanged at 41% in the third quarter of fiscal 2007 and 2006 and increased slightly to 41% in the first nine months of fiscal 2007 from 40% in the first nine months of fiscal 2006. Most of the fiscal 2007 revenue growth in this segment came from products and services with relatively lower costs of revenue, such as QuickBooks Payroll, Assisted Payroll and merchant services. The $48.2 million higher Payroll and Payments revenue in the first nine months of fiscal 2007 was partially offset by higher expenses, including increases of approximately $6 million for cost of revenue, approximately $8 million for product development expenses, approximately $3 million for selling and marketing expenses and approximately $6 million for general and administrative expenses in the fiscal 2007 period.
Consumer Tax
Consumer Tax segment operating income as a percentage of related revenue remained unchanged at 81% in the third quarter of fiscal 2007 and 2006 and decreased to 67% in the first nine months of fiscal 2007 from 70% in the first nine months of fiscal 2006. The $108.2 million growth in Consumer Tax revenue in the first nine months of fiscal 2007 was partially offset by higher expenses, including increases of approximately $42 million for selling and

35


Table of Contents

marketing expenses (including higher radio, television and online advertising expenses as well as higher direct marketing expenses) and approximately $16 million for product development expenses in the fiscal 2007 period.
Professional Tax
Professional Tax segment operating income as a percentage of related revenue increased to 80% in the third quarter of fiscal 2007 from 72% in the third quarter of fiscal 2006 and increased slightly to 61% in the first nine months of fiscal 2007 from 60% in the first nine months of fiscal 2006. Third quarter fiscal 2007 Professional Tax segment operating income was affected by the deferral of approximately $29 million in revenue associated with changes in our offerings and delay of delivery of certain product elements from the second quarter to the third quarter of fiscal 2007. This was approximately $27 million more than we deferred from the second quarter to the third quarter of fiscal 2006. If this additional deferral had not occurred, Professional Tax segment operating income as a percentage of related revenue would have been 75% for the third quarter of fiscal 2007. Professional Tax revenue increased $14.7 million while expenses were relatively stable in the first nine months of fiscal 2007 compared with the same period of fiscal 2006.
Financial Institutions
Financial Institutions segment operating income as a percentage of related revenue decreased to 22% in the third quarter of fiscal 2007 from 50% in the third quarter of fiscal 2006 and decreased to 23% in the first nine months of fiscal 2007 from 44% in the first nine months of fiscal 2006. The change in segment operating income structure is due to our February 2007 acquisition of Digital Insight, which is much larger and has higher costs than the Intuit financial institutions business that preceded it.
Other Businesses
Other Businesses segment operating income as a percentage of related revenue increased to 39% in the third quarter of fiscal 2007 from 35% in the third quarter of fiscal 2006 and increased to 30% in the first nine months of fiscal 2007 from 27% in the first nine months of fiscal 2006. The fiscal 2007 improvements in segment operating income as a percentage of related revenue were due to the May 2006 sale of our MasterBuilder business, which had relatively low operating margins.
Non-Operating Income and Expenses
Interest Expense
In order to finance a portion of our acquisition of Digital Insight, on February 6, 2007 we borrowed $1 billion under a bridge credit facility, which we retired in March 2007 with the proceeds of our issuance of $1 billion in senior notes. Interest expense for the third quarter and first nine months of fiscal 2007 included interest on the $1 billion bridge credit facility at 5.77% while it was outstanding and on the senior notes at 5.40% as to $500 million and 5.75% as to $500 million. The senior notes are due in March 2012 and March 2017 and are redeemable by Intuit at any time, subject to a make-whole premium. Fiscal 2007 interest expense also included the amortization of a total of $7.3 million in debt issuance costs over the terms of the related senior notes.
Interest and Other Income
Higher interest rates and higher average invested balances resulted in increases in interest income in the third quarter and first nine months of fiscal 2007 compared with the same periods of fiscal 2006. Interest income accounted for at least 90% of interest and other income in those periods.
Income Taxes
Our effective tax rate for the third quarter and first nine months of fiscal 2007 was approximately 36% and differed from the federal statutory rate due to state income taxes, which were partially offset by the benefit we received from federal and state research and experimental credits and tax exempt interest income. In addition, we benefited from the retroactive extension of the federal research and experimental credit in the first nine months of fiscal 2007. Our effective tax rates for the third quarter and first nine months of fiscal 2006 were approximately 39% and 38% and differed from the federal statutory rate of 35% due to state income taxes, which were partially offset by the benefit we received from federal and state research and experimental credits and tax exempt interest income.

36


Table of Contents

In December 2006 the Tax Relief and Health Care Act of 2006 was signed into law. The Act includes a reinstatement of the federal research and experimental credit retroactive to January 1, 2006. We recorded a discrete tax benefit of $3.7 million for the retroactive amount related to fiscal 2006 during the second quarter of fiscal 2007. The credit as reinstated has an expiration date of December 31, 2007.
We acquired Digital Insight on February 6, 2007. See Note 5 to the financial statements in Item 1. Digital Insight has approximately $61 million in federal net operating loss carryforwards. We have recorded the tax effects of these carryforwards, which totaled $24 million, as deferred tax assets. The carryforwards will not result in an income tax provision benefit, but they will reduce income taxes payable and cash paid for income taxes as they are utilized. At April 30, 2007, we had total net deferred tax assets of $122.5 million, which included a valuation allowance of $4.4 million for certain state capital loss and net operating loss carryforwards. The allowance reflects management’s assessment that we may not receive the benefit of certain loss carryforwards in certain state jurisdictions. While we believe our current valuation allowance is sufficient, it may be necessary to increase this amount if it becomes more likely that we will not realize a greater portion of the net deferred tax assets. We assess the need for an adjustment to the valuation allowance on a quarterly basis.
Intuit Information Technology Solutions Discontinued Operations
In December 2005 we sold our Intuit Information Technology Solutions (ITS) business for approximately $200 million in cash. In accordance with the provisions of SFAS 144, we accounted for the sale of ITS as discontinued operations. Consequently, we have segregated the operating results of ITS from continuing operations in our statements of operations for all periods prior to the sale. For the first nine months of fiscal 2006, we recorded net revenue from ITS of $20.2 million and net income from ITS operations of $5.2 million. We also recorded a net gain on disposal of ITS of $34.3 million in the first nine months fiscal 2006. We recorded a net loss of $1.1 million for certain contingent liabilities that became payable to the purchaser of ITS during the third quarter of fiscal 2007. See Note 6 to the financial statements in Item 1.
Liquidity and Capital Resources
Statement of Cash Flows
At April 30, 2007, our cash, cash equivalents and investments totaled $1.4 billion, an increase of $167.9 million from July 31, 2006. During the first nine months of fiscal 2007 we generated $814.7 million in cash from our continuing operations. We used $1.4 billion in cash for investing activities during that period, including approximately $1.2 billion for our purchase of Digital Insight (net of cash acquired) and $89.3 million for purchases of property and equipment. We generated $652.5 million in cash from financing activities during the first nine months of fiscal 2007, including approximately $1 billion from the issuance of long-term debt and $150.9 million from the issuance of common stock under employee stock plans partially offset by $506.6 million for the repurchase of common stock under our stock repurchase programs. Included in income taxes payable at April 30, 2007 is approximately $192 million in income taxes that we expect to pay during the fourth quarter of fiscal 2007.
Stock Repurchase Programs
Our Board of Directors has authorized a series of common stock repurchase programs. Shares of common stock repurchased under these programs become treasury shares. During the third quarter and first nine months of fiscal 2007 we repurchased 10.4 million and 17.1 million shares of our common stock for $301.2 million and $506.6 million under our stock repurchase programs. No authorized funds remained available for stock repurchases at April 30, 2007. On May 17, 2007 we announced a new stock repurchase program under which we are authorized to repurchase up to $800 million of our common stock from time to time over a three-year period ending on May 14, 2010.
Digital Insight Acquisition
On February 6, 2007 we acquired all of the outstanding shares of Digital Insight for a total purchase price of approximately $1.34 billion including the value of vested options assumed. See Note 5 to the financial statements in Item 1. We borrowed $1 billion under a one-year unsecured bridge credit facility with two institutional lenders in order to pay a portion of the purchase price of Digital Insight. This bridge facility accrued interest at a rate of 5.77%. On March 12, 2007 we retired this bridge credit facility with the proceeds of our issuance of $1 billion in long-term

37


Table of Contents

senior unsecured notes. We issued $500 million of 5.40% senior unsecured notes due on March 15, 2012 (the 2012 Notes) and $500 million of 5.75% senior unsecured notes due on March 15, 2017 (the 2017 Notes). The 2012 Notes and the 2017 Notes are redeemable by Intuit at any time, subject to a make-whole premium. The 2012 Notes and the 2017 Notes include covenants that limit our ability to grant liens on our facilities and to enter into sale and leaseback transactions, subject to significant allowances.
Sale of Outsourced Payroll Assets
On March 13, 2007 we completed the sale of certain assets related to our Complete Payroll and Premier Payroll Service businesses to Automatic Data Processing, Inc. (ADP) for a price of up to approximately $135 million in cash. At the close of the transaction we received an initial payment of $44.8 million from ADP. The final purchase price is contingent upon customers transitioning to ADP. The assets were part of our Payroll and Payments segment. In accordance with the provisions of SFAS 144, “Accounting for the Impairment or Disposal of Long-lived Assets,” we have not accounted for this transaction as a discontinued operation because the operations and cash flows of the assets could not be clearly distinguished, operationally or for financial reporting purposes, from the rest of our outsourced payroll business. We will recognize the net gain on the sale of the assets as customers are transitioned pursuant to the agreement over a period not to exceed one year from the date of the sale. In the third quarter of fiscal 2007 we recorded a net gain of $0.4 million in interest and other income in our statement of operations for customers who transitioned to ADP during that period and a deposit of $44.3 million in other current liabilities on our balance sheet. See Note 6 to the financial statements in Item 1.
Unsecured Revolving Credit Facility
On March 22, 2007 we entered into an agreement with certain institutional lenders for a $500 million unsecured revolving credit facility that will expire on March 22, 2012. Advances under the credit facility will accrue interest at rates that are equal to, at our election, either Citibank’s base rate or the London InterBank Offered Rate (LIBOR) plus a margin that ranges from 0.18% to 0.575% based on our senior debt credit ratings. The applicable interest rate will be increased by 0.05% for any period in which the total principal amount of advances and letters of credit under the credit facility exceeds $250 million. The agreement includes covenants that require us to maintain a ratio of total debt to annual earnings before interest, taxes, depreciation and amortization (EBITDA) of not greater than 3.25 to 1.00 and a ratio of annual EBITDA to interest payable of not less than 3.00 to 1.00. We may use amounts borrowed under this credit facility for general corporate purposes or for future acquisitions or expansion of our business. To date we have not borrowed under the credit facility, but we may borrow under the credit facility from time to time as opportunities and needs arise.
Other
We evaluate, on an ongoing basis, the merits of acquiring technology or businesses, or establishing strategic relationships with and investing in other companies. We may decide to use cash and cash equivalents, investments, and the revolving line of credit facility described above to fund such activities in the future.
Based on past performance and current expectations, we believe that our cash and cash equivalents, investments, and cash generated from operations will be sufficient to meet anticipated seasonal working capital needs, capital expenditure requirements, contractual obligations, commitments and other liquidity requirements associated with our operations for at least the next 12 months.

38


Table of Contents

Reserves for Returns and Rebates
Activity in our reserves for product returns and for rebates during the first nine months of fiscal 2007 and comparative balances at April 30, 2006 were as shown in the following table. Due to the seasonality of our business, we compare our returns and rebate reserve balances at April 30, 2007 to the reserve balances at April 30, 2006.
                                         
            Additions                
    Balance   Charged           Balance   Balance
    July 31,   Against   Returns/   April 30,   April 30,
(In thousands)   2006   Revenue   Redemptions   2007   2006
 
                                       
Reserve for product returns
  $ 29,385     $ 94,314     $ (50,509 )   $ 73,190     $ 65,112  
Reserve for rebates
    8,996       64,205       (34,919 )     38,282       28,076  
 
The fiscal 2007 increase in our reserve for product returns was due to higher revenue, especially in our Consumer Tax segment. The fiscal 2007 increase in our reserve for rebates was due to the timing of rebate promotions compared with fiscal 2006.
Off-Balance Sheet Arrangements
At April 30, 2007, we did not have any significant off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K.
Contractual Obligations
Woodland Hills Facilities Lease
We lease office facilities and equipment under various operating lease agreements. In November 2006 we entered into an agreement under which we will lease approximately 167,000 square feet of office space in a new building to be constructed by the landlord in Woodland Hills, California for our Innovative Merchant Solutions business. The lease term is 10 years beginning on October 1, 2008. We estimate that our total minimum commitment for this lease is approximately $70 million.
Digital Insight Commitments
In February 2007 we acquired Digital Insight, whose principal offices occupy approximately 46,000 square feet in Calabasas, California pursuant to a lease that expires on May 31, 2011. Digital Insight also occupies a total of approximately 129,000 square feet of office space in Westlake Village and Sacramento, California and in Athens, Atlanta and Norcross, Georgia. At April 30, 2007, our minimum commitments for Digital Insight facilities and other operating leases totaled approximately $12 million and our minimum Digital Insight vendor commitments totaled approximately $91 million and were primarily related to future outsourced bill payment services. The largest of these vendor commitments expires in June 2010.
Commitment for Interest Payments on Senior Notes
As described above in “Liquidity and Capital Resources – Digital Insight Acquisition,” in connection with our acquisition of Digital Insight we entered into a one-year $1 billion unsecured bridge credit facility. On March 12, 2007 we retired this bridge credit facility with the proceeds of our issuance of $1 billion in long-term senior unsecured notes. We issued $500 million of 5.40% senior unsecured notes due on March 15, 2012 (the 2012 Notes) and $500 million of 5.75% senior unsecured notes due on March 15, 2017 (the 2017 Notes). The 2012 Notes and the 2017 Notes are redeemable by Intuit at any time, subject to a make-whole premium. Interest is payable semiannually on March 15 and September 15 beginning on September 15, 2007. At April 30, 2007, our maximum commitment for interest payments under the senior notes was $422.5 million.

39


Table of Contents

Recent Accounting Pronouncements
FIN 48, “Accounting for Uncertainty in Income Taxes”
In June 2006 the FASB issued Financial Interpretation No. (FIN) 48, “Accounting for Uncertainty in Income Taxes.” FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with SFAS 109, “Accounting for Income Taxes.” FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. It also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006, which means that it will be effective for our fiscal year beginning August 1, 2007. We are in the process of evaluating this guidance and therefore have not yet determined the impact that the adoption of FIN 48 will have on our financial position, results of operations or cash flows.
SFAS 157, “Fair Value Measurements”
In September 2006 the FASB issued SFAS 157, “Fair Value Measurements.” SFAS 157 provides enhanced guidance for using fair value to measure assets and liabilities. The standard also responds to investors’ requests for expanded information about the extent to which companies measure assets and liabilities at fair value, the information used to measure fair value and the effect of fair value measurements on earnings. SFAS 157 applies whenever other standards require or permit assets or liabilities to be measured at fair value. This standard does not expand the use of fair value in any new circumstances. SFAS 157 is effective for fiscal years beginning after November 15, 2007, which means that it will be effective for our fiscal year beginning August 1, 2008. We are in the process of evaluating this standard and therefore have not yet determined the impact that the adoption of SFAS 157 will have on our financial position, results of operations or cash flows.
SFAS 159, “The Fair Value Option for Financial Assets and Financial Liabilities”
In February 2007 the FASB issued SFAS 159, “The Fair Value Option for Financial Assets and Financial Liabilities.” SFAS 159 provides companies with an option to report selected financial assets and liabilities at fair value. The standard’s objective is to reduce both complexity in accounting for financial instruments and the volatility in earnings caused by measuring related assets and liabilities differently. The standard requires companies to provide additional information that will help investors and other users of financial statements to more easily understand the effect of the company’s choice to use fair value on its earnings. It also requires companies to display the fair value of those assets and liabilities for which the company has chosen to use fair value on the face of the balance sheet. The new standard does not eliminate disclosure requirements included in other accounting standards, including requirements for disclosures about fair value measurements included in SFAS 157, “Fair Value Measurements,” and SFAS 107, “Disclosures about Fair Value of Financial Instruments.” SFAS 159 is effective for fiscal years beginning after November 15, 2007, which means that it will be effective for our fiscal year beginning August 1, 2008. We are in the process of evaluating this standard and therefore have not yet determined the impact that the adoption of SFAS 159 will have on our financial position, results of operations or cash flows.

40


Table of Contents

ITEM 3
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Investments
We do not hold derivative financial instruments in our portfolio of investments and funds held for payroll customers. Our investments and funds held for payroll customers consist of instruments that meet quality standards consistent with our investment policy. This policy specifies that, except for direct obligations of the United States government, securities issued by agencies of the United States government, and money market or cash management funds, we diversify our holdings by limiting our investments and funds held for payroll customers with any individual issuer.
Interest Rate Risk
Our cash equivalents and our portfolio of investments and funds held for payroll customers are subject to market risk due to changes in interest rates. Interest rate movements affect the interest income we earn on cash equivalents, investments and funds held for payroll customers and the value of those investments. Should the Federal Reserve Target Rate increase by 10% or about 53 basis points from the levels of April 30, 2007, the value of our investments and funds held for payroll customers would decline by approximately $1.4 million. Should interest rates increase by 100 basis points from the levels of April 30, 2007, the value of our investments and funds held for payroll customers would decline by approximately $2.7 million.
We are also exposed to the impact of changes in interest rates as they affect our $500 million revolving credit facility. Advances under the credit facility accrue interest at rates that are equal to Citibank’s base rate or the London InterBank Offered Rate (LIBOR) plus a margin that ranges from 0.18% to 0.575% based on our senior debt credit ratings. Consequently, our interest expense would fluctuate with changes in the general level of these interest rates if we were to borrow any amounts under the credit facility. At April 30, 2007, no amounts were outstanding under the credit facility.
In connection with our acquisition of Digital Insight, on March 12, 2007 we issued $500 million of 5.40% senior unsecured notes due on March 15, 2012 and $500 million of 5.75% senior unsecured notes due on March 15, 2017. Since these senior notes bear interest at fixed rates, they are not subject to market risk due to changes in interest rates.
Derivative Instruments
In December 2006 we entered into a $500 million notional amount five-year forward starting swap and a $500 million notional amount 10-year forward starting swap designated as cash flow hedges of the interest payments on the senior notes described in Note 9 to the financial statements in Item 1. Under these interest rate swap contracts, we made fixed-rate interest payments and received variable-rate interest payments based on the London Interbank Offered Rate (LIBOR). The effect of these swaps was to offset changes in the fixed rate between the date we entered into the interest rate swaps and the issuance date of the senior notes. We settled the interest rate swaps on March 7, 2007 for a cumulative gain of $0.7 million which will be amortized using the effective yield method as an adjustment of interest expense over the term of the related debt in our statements of operations. At April 30, 2007, the unamortized gain of $0.7 million was included in other comprehensive income in the stockholders’ equity section of our balance sheet.
Impact of Foreign Currency Rate Changes
The functional currency of our international operating subsidiaries is the local currency. Assets and liabilities of our foreign subsidiaries are translated at the exchange rate in effect on the balance sheet date. Revenue, costs and expenses are translated at average rates of exchange in effect during the period. We report translation gains and losses as a separate component of stockholders’ equity. We include net gains and losses resulting from foreign exchange transactions in our statements of operations.
Since we translate foreign currencies (primarily Canadian dollars and British pounds) into U.S. dollars for financial reporting purposes, currency fluctuations can have an impact on our financial results. The historical impact of currency fluctuations on our financial results has generally been immaterial. We believe that our exposure to

41


Table of Contents

currency exchange fluctuation risk is not significant because our international subsidiaries invoice customers and satisfy their financial obligations almost exclusively in their local currencies. Although the impact of currency fluctuations on our financial results has generally been immaterial in the past and we believe that for the reasons cited above currency fluctuations will not be significant in the future, there can be no guarantee that the impact of currency fluctuations will not be material in the future. As of April 30, 2007, we did not engage in foreign currency hedging activities.

42


Table of Contents

ITEM 4
CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Based upon an evaluation of the effectiveness of disclosure controls and procedures, Intuit’s Chief Executive Officer (CEO) and Chief Financial Officer (CFO) have concluded that as of the end of the period covered by this Quarterly Report on Form 10-Q our disclosure controls and procedures as defined under Exchange Act Rule 13a-15(e) and 15d-15(e) were effective to provide reasonable assurance that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission and is accumulated and communicated to management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
During our most recent fiscal quarter, there has not occurred any change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

43


Table of Contents

PART II
ITEM 1
LEGAL PROCEEDINGS
See Note 12 to the financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for a description of legal proceedings.

44


Table of Contents

ITEM 1A
RISK FACTORS
This report contains forward-looking statements regarding our business and expected future performance, and we are subject to many risks and uncertainties that may materially affect our business and future performance. All statements in this report, other than statements that are purely historical, are forward-looking statements. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “forecasts,” “estimates,” “seeks,” and similar expressions also identify forward-looking statements. In this report, forward-looking statements include, without limitation, the following:
  •   our expectations and beliefs regarding future conduct and growth of the business;
 
  •   the assumptions underlying our Critical Accounting Policies and Estimates, including our estimates regarding product rebate and return reserves; assumptions used to estimate the fair value of share-based compensation; and expected future amortization of purchased intangible assets;
 
  •   our beliefs regarding collection of principal and interest on certain debt securities we hold;
 
  •   our belief that our exposure to currency exchange fluctuation risk will not be significant in the future;
 
  •   our belief that our income tax valuation allowance is sufficient;
 
  •   our belief that our cash, cash equivalents and investments will be sufficient to meet our working capital and capital expenditure requirements for the next 12 months;
 
  •   our expectations regarding research and development efforts and expenses and the introduction of new or complementary products and related services and features;
 
  •   our beliefs regarding seasonality and other trends for our businesses;
 
  •   our assessments and beliefs regarding the future outcome of pending legal proceedings and the liability, if any, that Intuit may incur as a result of those proceedings;
 
  •   our expectations regarding the costs and other effects of acquisition and disposition transactions; and
 
  •   the expected effects of the adoption of new accounting standards.
An investment in Intuit’s stock involves risk, and we caution investors that forward-looking statements are only predictions based on our current expectations about future events and are not guarantees of future performance. We encourage you to read carefully all information provided in this report and in our other filings with the SEC before deciding to invest in our stock or to maintain or change your investment. Forward-looking statements are based on information as of the filing date of this report, and we undertake no obligation to publicly revise or update any forward-looking statement for any reason.
Because forward-looking statements involve risks and uncertainties, there are important factors that may cause actual results to differ materially from our stated expectations. These factors include the following:
  •   Intense competitive pressures in all of our businesses may negatively impact our revenue, profitability and market position.
 
  •   Future revenue growth for our core products depends upon our successful introduction of new and enhanced products and service.
 
  •   If we fail to maintain reliable and responsive service levels for our electronic tax offerings, or if the IRS or other governmental agencies experience difficulties in receiving customer submissions, we could lose customers and our revenue and earnings could decrease.
 
  •   The nature of our products necessitates timely product launches and if we experience significant product quality problems or delays, it will harm our revenue, earnings and reputation.
 
  •   Possession and use of personal customer information by our businesses presents risks and expenses that could harm our business.
 
  •   Our revenue and earnings are highly seasonal and our quarterly results fluctuate significantly.
 
  •   The growth of our business depends on our ability to adapt to rapid technological change.
 
  •   Failure to maintain the availability and security of the systems, networks, databases and software required to operate and deliver our Internet-based products and services could adversely affect our operating results.
 
  •   Our reliance on a limited number of manufacturing and distribution suppliers could harm our business.
 
  •   As our product and service offerings become more complex our revenue streams may become less predictable.

45


Table of Contents

  •   Our dependence on a small number of larger retailers and distributors could harm our results of operations.
 
  •   Failure of our information technology systems or those of our service providers could adversely affect our future operating results.
 
  •   Increased government regulation of tax preparation services could harm our business.
 
  •   If we do not respond promptly and effectively to customer service and technical support inquiries we will lose customers and our revenue and earnings will decline.
 
  •   If we encounter problems with our third-party customer service and technical support providers our business will be harmed and our margins will decline.
 
  •   Risks associated with credit card and payment fraud and with credit card processing can harm our business.
 
  •   If we fail to adequately protect our intellectual property rights, competitors may exploit our innovations, which could weaken our competitive position and reduce our revenue and earnings.
 
  •   Third parties claiming that we infringe their proprietary rights could cause us to incur significant legal expenses and prevent us from selling our products.
 
  •   We expect copying and misuse of our intellectual property to be a persistent problem causing lost revenue and increased expenses.
 
  •   We may not be able to obtain necessary licenses for third-party technologies and content used in our products and services.
 
  •   Our acquisition activity could disrupt our ongoing business and may present risks not contemplated at the time of the transactions.
 
  •   If actual product returns exceed returns reserves our financial results would be harmed.
 
  •   Acquisition-related costs and impairment charges can cause significant fluctuation in our net income.
 
  •   Our payroll business involves significant cash and transaction volumes, and if we do not operate this business effectively our revenue and earnings will be harmed.
 
  •   Interest income attributable to payroll customer deposits may fluctuate or be eliminated, causing our revenue and earnings to decline.
 
  •   We may be unable to attract and retain key personnel.
 
  •   We are frequently a party to litigation that is costly to defend and consumes the time of our management.
 
  •   Unanticipated changes in our tax rates could affect our future financial results.
 
  •   If we fail to maintain an effective system of internal controls, we may not be able to detect fraud or report our financial results accurately, which could harm our business and the trading price of our common stock.
 
  •   Business interruptions could adversely affect our future operating results.
This list does not include all risks that could affect our business, and if these or any other risks or uncertainties materialize, or if our underlying assumptions prove to be inaccurate, actual results could differ materially from past results and from our expected future results.
Our Annual Report on Form 10-K for the fiscal year ended July 31, 2006 lists in more detail various important risk factors facing our business in Part I, Item 1A under the heading “Risk Factors.” Except as set forth below, there have been no material changes from the risk factors disclosed in that section of our Form 10-K. We incorporate that section of the Form 10-K into this filing and encourage you to review that information. We also encourage you to review our other reports filed periodically with the Securities and Exchange Commission for any further information regarding risks facing our business.
We face intense competitive pressures in all of our businesses that may negatively impact our revenue, profitability and market position.
We have formidable competitors, and we expect competition to remain intense during fiscal 2007 and beyond. The number, resources and sophistication of the companies with whom we compete have increased as we continue to expand our product and service offerings. Our competitors may introduce new and improved products and services, bundle new offerings with market-leading products, reduce prices, gain better access to distribution channels, advertise aggressively or beat us to market with new products and services. We also face growing competition from providers of free online accounting, bookkeeping, tax, banking and other business-related services. Any of these competitive actions taken over any prolonged period could diminish our revenue and profitability and could affect

46


Table of Contents

our ability to keep existing customers and acquire new customers. Some additional competitive factors that may impact our businesses are discussed below.
QuickBooks and Payroll and Payments. Losing existing or potential QuickBooks customers to competitors causes us to lose potential software revenue and also limits our opportunities to sell related products and services such as our financial supplies, small business payroll and merchant services offerings. Many competitors provide accounting and business management products and services to small businesses. For example, Microsoft Corporation currently offers Microsoft Office Small Business Accounting and offers, in partnership with third parties, several other competitive products and services, including a payroll solution for small businesses, credit and debit card processing services, and business checks, forms envelopes and related printed products. We expect that competition from Microsoft as well as new or currently unidentified competitors will intensify over time with these and future offerings that directly compete with QuickBooks and our other offerings. Although we have successfully competed with Microsoft in the past, Microsoft’s small business product and service offerings may still have a significant negative impact on our future revenue and profitability.
Our principal competitors in the small business payroll services business benefit from greater economies of scale due to their substantial size, which may result in pricing pressure for our offerings. The growth of electronic banking and other electronic payment systems is decreasing the demand for checks and consequently causing pricing pressure for our financial supplies business as competitors aggressively compete for share of this shrinking market.
Several of our products also compete with web-based electronic banking, finance tracking and management tools that are becoming increasingly available at no cost to consumers. If we are unable to provide products with features and services that compete effectively with these free offerings, our revenue and profitability may suffer.
Consumer Tax. Our consumer tax business faces significant competition from both the public and private sector. In the public sector we face the risk of federal and state taxing authorities developing or contracting to provide software or other systems to facilitate tax return preparation and electronic filing at no charge to taxpayers.
  •   Federal Government. Agencies of the U.S. government have made several attempts during the two most recent presidential administrations to initiate a program to offer taxpayers free online tax preparation and filing services. However, in October 2002 the Internal Revenue Service agreed not to provide its own competing tax software product or service so long as participants in a consortium of tax preparation software companies, including Intuit, agreed to provide web-based federal tax preparation and filing services at no cost to qualified taxpayers under an arrangement called the Free File Alliance. In October 2005 the IRS and the Free File Alliance signed a new four-year agreement that continues to restrict the IRS from entering the tax preparation business. This agreement specifies the category of taxpayers eligible to receive free services and places limits on the ability of participating companies to target their free offering to more than 50% of all U.S. taxpayers. The Free File Alliance has kept the federal government from being a direct competitor to our tax offerings in the past. However, it has also fostered additional web-based competition and could cause us to lose significant revenue opportunities from our Consumer Tax customer base. Companies have used the Free File Alliance and its position on the IRS web site as a marketing tool by giving away free services at the federal level and attempting to make money by selling state filing and other services, which has intensified competition. In addition, persons who formerly have paid for our products may elect to use our or our competitors’ unpaid federal offering instead. The IRS has the right to terminate the agreement with the Free File Alliance upon 24 months written notice. If the IRS were to terminate the agreement and elect to provide government software and electronic filing services to taxpayers at no charge, or if other governmental bodies were to significantly alter the Free File Alliance or require the provision of government tax filing services directly to taxpayers, our revenue and profits could suffer. See the discussion on the Free File Alliance in Item 1, “Business – Competition.”
 
  •   State Governments. State taxing authorities have also actively pursued various strategies to provide free online tax return preparation and electronic filing services for state taxpayers. As of July 31, 2006, 21 states had entered into agreements with the private sector based on the federal Free File Alliance agreement and had agreed to discontinue or otherwise not provide direct government tax preparation services. However, 20 other states, including California, have directly offered their own online tax preparation and filing services to taxpayers. For example, for the 2004 and 2005 tax years California tested a limited pilot program under which a state-operated electronic system automatically prepared and filed approximately 10,000 state income tax returns with no individual transaction charge to those taxpayers. In August 2005 the California legislature enacted a law restricting the extension of this program beyond the 2005 tax year. Notwithstanding this law, the California Franchise Tax Board voted in December 2006 to renew and expand the program for tax year 2007. Similar programs in other states could also be introduced or

47


Table of Contents

      expanded in the future. These publicly sponsored programs could cause us to lose customers to free offerings and enable competitors to gain market share at our expense by using participation in the free alliances as an effective tool to attract customers to ancillary paid offerings. Given the efficiencies that electronic tax filing provides to taxing authorities, we anticipate that governmental competition will present a continued competitive threat to our business for the foreseeable future.
 
  •   Private Sector. In the private sector we face intense competition primarily from H&R Block, the makers of TaxCut software, and increasingly from web-based offerings such as 2nd Story Software’s TaxACT, where we are subject to significant and increasing price pressure. We also compete for customers with low-cost assisted tax preparation businesses, such as H&R Block. In addition, companies that provide free online tax preparation services, whether through the Free File Alliance or otherwise, may reduce demand for our paid offerings which would harm our business and results of operations.
Professional Tax. Our ProSeries professional tax offerings face pricing pressure from competitors seeking to obtain our customers through deep product discounts and loss of customers to competitors with offerings at lower prices. Our Lacerte professional tax offerings face competition from competitively-priced tax and accounting solutions that include integration with non-tax functionality.
Financial Institutions. In February 2007 we completed the acquisition of Digital Insight Corporation which provides outsourced online banking applications and services to banks, credit unions and savings and loan associations. We now compete with several companies that provide these services to financial institutions. The market for online banking services is highly competitive and fragmented with many providers. We face competition from two main sources: other companies similar to Digital Insight that offer outsourced Internet banking offerings, and vendors of data processing services to financial institutions. Also, vendors that primarily target the largest financial institutions occasionally compete in our target market. In some instances, we also compete with companies with whom we have referral or reseller relationships. Some of our current and potential competitors have longer operating histories and may be in a better position to produce and market their services due to their greater technical, marketing and other resources, as well as their greater name recognition and larger installed bases of customers. In addition, many of our competitors have well-established relationships with our current and potential financial institution customers and data processing vendors and have extensive knowledge of our industry.
As we negotiate the renewal of long-term service contracts with current customers, we may be subject to competitive pressures and other factors that may require concessions on pricing and other material contract terms to induce the customer to remain with us. We depend on our financial institution clients to market and promote our products to their end user customers, but these efforts may not be successful, and we may not be able to persuade potential customers to adopt our solutions in place of financial institutions’ own proprietary solutions or offerings by third parties. If we are unable to compete effectively with other online banking service providers, our business results may suffer.
Other Businesses. Our Quicken products compete both with Microsoft Money, which is aggressively promoted and priced, and with web-based electronic banking and personal finance tracking and management tools that are becoming increasingly available at no cost to consumers. These competitive pressures may result in reduced revenue and lower profitability for our Quicken product line and related bill payment service offering.
If we fail to maintain reliable and responsive service levels for our electronic tax offerings, or if the IRS or other governmental agencies experience difficulties in receiving customer submissions, we could lose customers and our revenue and earnings could decrease.
Our web-based tax preparation services and electronic filing services are an important and growing part of our tax businesses and must effectively handle extremely heavy customer demand during the peak tax season from January to April. We face significant risks and challenges in maintaining these services and maintaining adequate service levels, particularly during peak volume service times. Similarly, governmental entities receiving electronic tax filings must also handle large volumes of data and may experience difficulties with their systems preventing the receipt of electronic filings. If customers are unable to file their returns electronically they may elect to make paper filings. This would result in reduced electronic tax return preparation and filing revenues and would harm our reputation and ability to attract and retain customers. For example, on April 17, 2007 our customers experienced significant delays in electronically filing their income tax returns due to an intermittent database problem in our e-filing system. We have refunded approximately $10 million in credit card charges for our consumer electronic filing and online tax preparation services that were made during the time that the delays occurred, which will not have a significant impact on our fiscal 2007 financial condition or results of operations. However, we may experience

48


Table of Contents

problems with our online systems and services in the future, and any prolonged interruptions in our web-based tax preparation or electronic filing service at any time during the tax season could result in lost customers, additional refunds of customer charges, negative publicity, and increased operating costs, any of which could significantly harm our business, financial condition and results of operations.
Risks associated with our financial institutions business may harm our results of operations and financial condition.
In February 2007 we completed the acquisition of Digital Insight, a provider of outsourced online banking services and applications to financial institutions. This new financial institutions business is subject to several risks, including the following:
  •   consolidation among core data processing vendors may affect our reseller and revenue-sharing agreements with certain core processor organizations or reduce the likelihood of extending our agreements at expiration;
 
  •   the systems that support our online banking offerings will require additional modifications and improvements to respond to current and future changes in our business, and if we fail to implement appropriate systems, procedures, controls and necessary modifications and improvements to these systems, our business will suffer;
 
  •   unless our online banking offerings are successfully deployed and marketed by a significant number of financial institutions and achieve widespread market acceptance by their end user customers for a significant period of time, our business may suffer;
 
  •   if we are unable to integrate third-party software in a fully functional manner for our clients, we may experience difficulties that could delay or prevent the successful development, introduction or marketing of our services;
 
  •   if any of our products fail to be supported by financial institutions’ data processing vendors, we would have to redesign our products to suit these financial institutions, and we cannot assure that any redesign could be accomplished in a cost-effective or timely manner, and we could experience higher implementation costs or the loss of current and potential customers;
 
  •   the financial institutions business experiences lengthy sales cycles for a variety of reasons, which could cause us to expend substantial employee and management resources without making a sale or could cause our operating results to fall short of anticipated levels for a particular quarter;
 
  •   the financial services industry is subject to extensive and complex federal and state regulation, and our financial institution customers must ensure that our services and related products work within the regulatory requirements applicable to them;
 
  •   government authorities could adopt laws, rules or regulations that affect our financial institutions business, such as requirements related to data, record keeping and processing, which could make our business more costly, burdensome, less efficient or impossible, and require us to modify our current or future products or services; and
 
  •   consolidation of the banking and financial services industry could result in a smaller market for our products and services, may cause us to lose relationships with key customers, or may result in a change in the technological infrastructure of the combined entity, which may make it difficult to integrate our offerings.
Our acquisition and divestiture activities could disrupt our ongoing business, may involve increased expenses, and may present risks not contemplated at the time of the transactions.
We have acquired and may continue to acquire companies, products and technologies that complement our strategic direction. In February 2007 we completed the acquisition of Digital Insight for total consideration of approximately $1.34 billion including the value of assumed vested options. Acquisitions involve significant risks and uncertainties, including:
  •   inability to successfully integrate the acquired technology and operations into our business and maintain uniform standards, controls, policies, and procedures;
 
  •   inability to realize synergies expected to result from an acquisition;
 
  •   distraction of management’s attention away from normal business operations;

49


Table of Contents

  •   challenges retaining the key employees, customers, resellers and other business partners of the acquired operation;
 
  •   lack of experience in new markets, products or technologies or the initial dependence on unfamiliar supply or distribution partners;
 
  •   insufficient revenue generation to offset liabilities assumed;
 
  •   expenses associated with the acquisition; and
 
  •   unidentified issues not discovered in our due diligence process, including product or service quality issues, intellectual property issues and legal contingencies.
Acquisitions and divestitures are inherently risky. We can not be certain that our previous, pending or future transactions will be successful and will not materially adversely affect the conduct, operating results or financial condition of our business. Many transactions are subject to closing conditions, which may not be satisfied, and transactions may not be successfully completed even after their public announcement. We have generally paid cash for our recent acquisitions. These transactions may involve further use of our cash resources, the issuance of equity or debt securities, the incurrence of other forms of debt, the amortization of expenses related to intangible assets, or potential future impairment charges related to goodwill that we record on our balance sheet, which will be subject to annual testing in the future, any of which could harm our financial condition and results of operations. In particular, we allocated a portion of the purchase price for Digital Insight to goodwill, which could be subject to potential future impairment charges, and we also allocated a portion of the purchase price to identified intangible assets, which we expect to amortize over a period of three to five years. Further, we funded $1 billion of the purchase price of Digital Insight with the proceeds of senior unsecured notes. The use of debt to fund acquisitions or for other purposes significantly increases our interest expense and leverage. If we issue equity securities as consideration in an acquisition, current stockholders’ percentage ownership and earnings per share may be diluted.
In March 2007 we sold certain assets related to our Complete Payroll and Premier Payroll Service businesses to ADP for a maximum price of approximately $135 million. Because the final purchase price is contingent upon customers transitioning to ADP, the price could be materially less than the maximum if we do not successfully implement the transition process. We also expect to recognize any gain on the sale of these assets over a period not to exceed one year from the date of sale. We may continue to incur significant expenses of servicing customers prior to any transition.
We have issued $1 billion in a debt offering and may incur other debt in the future, which could adversely affect our financial condition and results of operations.
In connection with the acquisition of Digital Insight, we have issued $1 billion in senior unsecured notes. We have also entered into a $500 million five-year revolving credit facility. Although we have no current plans to request any advances under this credit facility, we may use the proceeds of any future borrowing for general corporate purposes or for future acquisitions or expansion of our business.
We have not previously incurred substantial amounts of debt for borrowed money, and our incurrence of this debt may adversely affect our operating results and financial condition by, among other things:
  •   increasing our vulnerability to downturns in our business, to competitive pressures and to adverse economic and industry conditions;
 
  •   requiring the dedication of a portion of our expected cash from operations to service our indebtedness, thereby reducing the amount of expected cash flow available for other purposes, including capital expenditures and acquisitions; and
 
  •   limiting our flexibility in planning for, or reacting to, changes in our business and our industry.
Our current revolving credit facility imposes restrictions on us, including restrictions on our ability to create liens on our assets and the ability of our subsidiaries to incur indebtedness, and require us to maintain compliance with specified financial ratios. Our ability to comply with these ratios may be affected by events beyond our control. In addition, our long-term non-convertible debt includes covenants that may adversely affect our ability to incur certain liens or engage in certain types of sale and leaseback transactions. If we breach any of the covenants under our long-term debt or our revolving credit facilities and do not obtain a waiver from the lenders, then, subject to applicable cure periods, our outstanding indebtedness could be declared immediately due and payable.

50


Table of Contents

In addition, changes by any rating agency to our credit rating can negatively impact the value and liquidity of both our debt and equity securities. If our credit ratings are downgraded or other negative action is taken, the interest rate payable by us under our revolving credit facility would increase. In addition, any downgrades in our credit ratings could affect our ability to obtain additional financing in the future and may affect the terms of any such financing.
Third parties claiming that we infringe their proprietary rights could cause us to incur significant legal expenses and prevent us from selling our products.
From time to time, we have received claims that we have infringed the intellectual property rights of others. As the number of products in the software industry increases and the functionality of these products further overlap, and as we acquire technology through acquisitions or licenses, we believe that we may become increasingly subject to infringement claims, including patent, copyright, and trademark infringement claims. We expect that software products in general will increasingly be subject to these claims as the number of products and competitors increase, the functionality of products overlap and as the patenting of software functionality continues to grow. We have, from time to time, received allegations of patent infringement claims in the past and may receive more claims in the future based on allegations that our products infringe upon patents held by third parties. Some of these claims are currently the subject of pending litigation against us and against some of our OEM customers. These claims may involve patent holding companies or other adverse patent owners who have no relevant product revenues of their own, and against whom our own patents may provide little or no deterrence. Future claims could present an exposure of uncertain magnitude. The ultimate outcome of any allegation is uncertain and, regardless of outcome, any such claim, with or without merit, could be time consuming to defend, result in costly litigation, divert management’s time and attention from our business, require us to stop selling, to delay shipping or to redesign our products, or require us to pay monetary damages for royalty or licensing arrangements, or to satisfy indemnification obligations that we have with some of our customers. Our failure to obtain necessary license or other rights, or litigation arising out of intellectual property claims could adversely affect our business.
In addition, we license and use software from third parties in our business. These third party software licenses may not continue to be available to us on acceptable terms. Also, these third parties may from time to time receive claims that they have infringed the intellectual property rights of others, including patent and copyright infringement claims, which may affect our ability to continue licensing their software. Our inability to use any of this third party software could result in shipment delays or other disruptions in our business, which could materially and adversely affect our operating results.

51


Table of Contents

ITEM 2
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
Stock repurchase activity during the three months ended April 30, 2007 was as follows:
                                 
                    Total Number   Approximate
                    of Shares   Dollar Value of
    Total Number   Average   Purchased as   Shares That May
    of Shares   Price Paid   Part of Publicly   Yet Be Purchased
Period   Purchased   per Share   Announced Plans   Under the Plans
 
                               
February 1, 2007 through
    2,315,362     $ 31.00       2,310,000     $ 229,605,767  
February 28, 2007
                               
 
                               
March 1, 2007 through
    5,440,000     $ 28.16       5,440,000     $ 76,402,856  
March 31, 2007
                               
 
                               
April 1, 2007 through
    2,673,600     $ 28.58       2,673,600     $ —  
April 30, 2007
                               
 
                               
 
                               
Total
    10,428,962     $ 28.90       10,423,600          
 
                               
 
Notes:
 
1.   Share figures above reflect Intuit’s July 2006 two-for-one stock split. See Note 1 and Note 11 to the financial statements.
 
2.   All shares purchased as part of publicly announced plans during the three months ended April 30, 2007 were purchased under a plan we announced on May 17, 2006 under which we repurchased the full $500 million of common stock approved. On May 17, 2007 we announced a new stock repurchase program under which we are authorized to repurchase up to $800 million of our common stock from time to time over a three-year period ending on May 14, 2010. No authorized funds remain under our previous stock repurchase programs. For additional information about Intuit’s historical stock repurchase activities, see Note 11 to the financial statements.

52


Table of Contents

ITEM 6
EXHIBITS
We have filed the following exhibits as part of this report:
                            
Exhibit       Filed   Incorporated
Number   Exhibit Description   Herewith   by Reference
4.01
  Indenture, dated as of March 7, 2007, between the Company and The Bank of New York Trust Company, N.A. as trustee (incorporated by reference to Exhibit 4.01 to Form 8-K filed by the Registrant on March 7, 2007)       X
 
           
10.01
  Underwriting Agreement, dated March 7, 2007, by and among the Company, J.P. Morgan Securities Inc. and Citigroup Global Markets Inc., on behalf of the several underwriters named therein (incorporated by reference to Exhibit 1.01 to Form 8-K filed by the Registrant on March 12, 2007)       X
 
           
10.02
  Five Year Credit Agreement dated as of March 22, 2007, by and among Intuit Inc., the Lenders parties thereto, JPMorgan Chase Bank, N.A., as syndication agent, and Citicorp USA, Inc., as administrative agent (incorporated by reference to Exhibit 10.01 to Form 8-K filed by the Registrant on March 22, 2007)       X
 
           
31.01
  Certification of Chief Executive Officer   X    
 
           
31.02
  Certification of Chief Financial Officer   X    
 
           
32.01
  Section 1350 Certification (Chief Executive Officer)   X    
 
           
32.02
  Section 1350 Certification (Chief Financial Officer)   X    

53


Table of Contents

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
         
  INTUIT INC.
(Registrant)

 
 
Date: May 30, 2007  By:   /s/ KIRAN M. PATEL    
    Kiran M. Patel   
    Senior Vice President and Chief Financial Officer
(Authorized Officer and Principal Financial Officer) 
 
 

54


Table of Contents

EXHIBIT INDEX
                            
Exhibit       Filed   Incorporated
Number   Exhibit Description   Herewith   by Reference
4.01
  Indenture, dated as of March 7, 2007, between the Company and The Bank of New York Trust Company, N.A. as trustee (incorporated by reference to Exhibit 4.01 to Form 8-K filed by the Registrant on March 7, 2007)       X
 
           
10.01
  Underwriting Agreement, dated March 7, 2007, by and among the Company, J.P. Morgan Securities Inc. and Citigroup Global Markets Inc., on behalf of the several underwriters named therein (incorporated by reference to Exhibit 1.01 to Form 8-K filed by the Registrant on March 12, 2007)       X
 
           
10.02
  Five Year Credit Agreement dated as of March 22, 2007, by and among Intuit Inc., the Lenders parties thereto, JPMorgan Chase Bank, N.A., as syndication agent, and Citicorp USA, Inc., as administrative agent (incorporated by reference to Exhibit 10.01 to Form 8-K filed by the Registrant on March 22, 2007)       X
 
           
31.01
  Certification of Chief Executive Officer   X    
 
           
31.02
  Certification of Chief Financial Officer   X    
 
           
32.01
  Section 1350 Certification (Chief Executive Officer)   X    
 
           
32.02
  Section 1350 Certification (Chief Financial Officer)   X    

55